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Challenges Faced by Jay Powell Amidst Inflation Concerns

This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:

Jay Powell Balances Economic Responsibilities and Political Pressures

Jay Powell always has a tough job ÔÇö looking out for the US economy while avoiding partisan potholes along the way. Tough might be the kindest version of the task.

And this position rarely looks more tenuous than when Powell is being grilled by members of Congress, as he was on Wednesday and will be again later this morning.

“It’s a super difficult situation,” Seth Carpenter, chief global economist at Morgan Stanley, said on “Market Domination,” Yahoo Finance’s new afternoon streaming show.

“We had a bout of inflation that is worse than just about anything we’ve seen. Everybody has seen those prices going up and so the Fed really is stuck between a rock and a hard place, and they’re trying hard to balance things.”

As my colleague Ben Werschkul recently pointed out, Democrats and Republicans are emphasizing different time frames when it comes to inflation.

The left has focused on disinflation, with prices accelerating at a much slower rate today than at inflation’s peak near 9% in the summer of 2022. The right, meanwhile, points out that prices on an absolute basis are still much higher than they were a few years ago.

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Dealing with Political Influences on Economic Decisions

But politics, of course, isn’t exactly the domain for nuanced discussion that accepts both parties are right to make their point. Inflation is slowing down, and prices have risen enough that the cost of living has become more challenging for many Americans.

Recent polling that found wide divergences in perceptions of the economy between Democrats and Republicans left Yahoo Finance columnist Rick Newman baffled, given, as he pointed out, the stock market is at record highs and unemployment is near its lowest since 1969.

And a lot of this reflects the psychology of experiencing significantly rising prices for the first time in many peopleÔÇÖs adult lifetimes.

On Wednesday, Democratic Rep. Ayanna Pressley took Powell to task over housing affordability, telling the Fed chair, “Interest rates are too damn high.”

House Financial Services Committee Chairman Patrick McHenry, a Republican from North Carolina, told Powell, “I have faith that you will not allow politics to cloud your judgment in the fight to tackle inflation.”

Comments that each left room for their proponents to infer the opposite. All while the Fed, of course, maintains that politics do not play a role in its policy decisions.

Powell, in prepared remarks Wednesday, said, “Everything we do is in service to our public mission.”

A mission that, like inflation, appears to be getting the most notice in decades. And leaving most everyone just as unhappy.

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