The biggest threat to the economy right now: Jerome Powell's ego
Despite the encouraging inflation news and the resilience of the economy, the chances of a soft landing will ultimately come down to one thing: Powell's view of his place in history. The current bout of inflation has drawn many comparisons to the sustained price surges of the 1970s and 1980s, when the CPI rose as high as 14.5%.
Barry Gill, the head of investments at UBS Asset Management, also suggested that the Fed will not pause its fight against inflation — much less pivot to supporting the economy with interest-rate cuts — because of Powell's eye for history. And as much as Powell does not want to end up with a historic reputation like Burns, he has also long admired Volcker, even going so far as to crib some of. And some experts believe Powell's focus on the real economy, even at the expense of the stock and bond markets, is a close parallel to Volcker's.
While history may look back favorably on Powell if he manages to control inflation, many experts and economists believe that too much emphasis on fighting the inflation battles of the past could end up defining Powell's legacy in a different way.While economists and historians will litigate Powell's reputation for years to come, most experts agree that a continued upward drive in interest rates will cause severe pain for American workers and the stock market alike.
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