The current Federal Reserve policy making team supports Chair Powell's latest gameplan to pull down inflation, but he is facing criticism from his former colleagues, including his recent top lieutenants.
Richard Clarida, who was Powell's vice chair until January, said this week that interest rates will have to go to levels his former boss hasn't acknowledged. The team should have started battling inflation last September, and the Fed now faces a likely recession to bring prices under control, says the other vice chair.
There is plenty of company for the duo. The former vice chair of the Fed, Alan Blinder, and the former president of the New York Federal Reserve, William Dudley, are among those who are seeing a recession.
Powell took a three-quarter percentage point rate hike off the menu of options in the immediate future, and other observers have chimed in with remonstrations. The former Treasury Secretary said he was surprised that he took it off the table.
After raising the key rate by half a point this week, Powell indicated that the Federal Open Market Committee will raise it by another half a point in June and July. He wasn't sure if rates would need to rise to levels that restrict economic activity, in contrast to a raft of former officials who have no such uncertainty.
The policy was led by Arthur Burns and G. William Miller and they had no idea how to deal with inflation.
The Fed is not going to say that they made a mistake, according to the head of global economics at Bank of America Corp. He said that the criticism helped to gel the opinion of the committee to step up the inflation fight.
Narayana Kocherlakota compared the Fed's oversight of the U.S. economy to a country music song about a reckless driver.
Kocherlakota wrote last month that turning in the wrong direction is a mistake many drivers make.
Powell has faced relatively gentle treatment in congressional appearances after an extensive campaign to build relations with both Republicans and Democrats. While he's still waiting for confirmation to a second term at the Fed, it's a foregone conclusion that he'll get the nod from the Senate.
Powell sought to address the economic concerns of ordinary Americans with a direct appeal at the start of his press conference Wednesday.
He said that inflation is too high and that they are moving quickly to bring it down. The highest annual rate in 40 years was recorded in the most recent reading.
The chair is blamed by ex-Fed officials for not doing enough because they agree with the need to move quickly.
Charles Plosser, a former president of the Philadelphia Fed, said in an interview that this is a problem of their own making. While the Fed chair was right to highlight the dangers of inflation, I don't know where Powell was a year ago, Plosser said.
In his policy votes, Quarles never dissented and he said the FOMC was too slow to react to rising inflation last year. He blamed the delay on uncertainty over the future of the Fed's leadership, as Biden took months to decide on pending nominations.
Powell is still credited with changing course by many former officials.
The Fed has evaluated the evidence, admitted mistakes, and taken swift action to correct them, according to former Vice Chair Donald Kohn.
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