Jerome “The Hawk” Powell drives himself to the concluding day of the penultimate FOMC meeting for the year. The fog outside has him in a bad mood. He wonders how he got himself into this mess. Why didn’t he just seek a profession in the private sector where the weight of the free markets wasn’t on his shoulders? He knows he only has four more meetings before his term is over next May. What will his legacy be? Has he done enough to fight inflation? Everything is so expensive these days! His own car is 25 years old and there’s a service light on the dash that won’t go away, yet he can’t justify spending $50,000 for some import job that’s going to depreciate the minute he drives off the lot and he knows that new car smell isn’t worth an extra $15,000. “Damn tariffs!“, he yells without meaning to.
“And why is everyone driving so fast?” he wonders aloud to himself. Although there is no risk-free path in the city, he feels that people would be better off it they just slowed down. He feels that anyone with a license has the dual mandate to keep up with traffic and get to where they need to go safely. Sometimes though there are downside risks to driving like everyone around you. He can’t even see the street signs and wonders if he is even on the right road. There’s no indication what the speed limit is and he feels disoriented. “It’s like driving blind“, he again blurts out loud. He taps the brakes to feel a little more sure of himself, and feels that the balance of risk has shifted in his favor. His hawk vision is second to none and he’s able to collect scraps of data here and there. Certain landmarks here and there confirm he’s at least heading in the right direction. Yet he knows inherently from the erratic behavior that the drivers of the other cars around him aren’t so certain.
Though he arrives in the parking lot without incident, he doesn’t feel at ease. In fact, he’s far from it. His feathers are ruffled and he’s used all his brain power to get safely get to the Federal Reserve building moments before the meeting starts. As a result, he hasn’t put a lot of thought into what his remarks will be at the conclusion of the meeting. Oh, well, it’ll come to him. During the next four hours he comes up with an idea to share the analogy of his commute into the office this morning. The fog, the fight against inflation, tariffs, no path without risk, slowing down, the dual mandate, driving blind, scraps of data, and ultimately, his sense of moving in the right direction despite the dissenters around him.
In the end, that’s what he does. He announces that the Fed will lower their overnight rate by 0.25% and spends a few minutes explaining the dangers associated with cutting too fast or not enough. He indicates they’re going to take measures to increase liquidity, and then answers redundant questions for a half hour. And during the relatively brief time he talks, despite having just announced a short term rate reduction, long-term rates rise 0.15%. The hawk’s mission is accomplished.
