「Fed Whisperer」 Digs Deep on Powell: The Fed's Quiet Leadership Is No Accident, with a Unique Understanding of Inflation

BlockBeats News, August 24th. Nick Timiraos, a Wall Street Journal reporter known as the "Fed Whisperer," pointed out in a recent article that Powell's silent revolution at the Fed was not accidental. He has long criticized the Fed's core communication tools introduced since 2012 — the "dot plot" and the Summary of Economic Projections.

Timiraos noted that many on Wall Street cheered Powell's appointment 15 years ago, seeing him as a natural inflation hawk. However, meeting transcripts and quarterly forecast data released years later revealed that his understanding of inflation was highly atypical. His logic relied less on traditional demand-side indicators like the unemployment rate and was deeply rooted in the supply side and government policy.

At the height of the 2007-2009 financial crisis, Fed colleagues generally saw the 9% high unemployment rate as sufficient economic slack to contain inflation. Powell, on the other hand, saw permanent structural damage. He pointed out that capital wasn't flowing to the most productive areas, the labor market lost its ability to adjust, and Washington's unpredictable policies exacerbated the situation. If unemployment was structural rather than cyclical, it couldn't constrain prices.

Timiraos stated that in hindsight, Powell's pessimistic predictions about economic growth potential have partly come true. As he warned, tightening regulations, fiscal, and trade policies became growth-unfriendly, damaging the economy's productive capacity. A shrunken economy hits its capacity limit faster and is more susceptible to external inflationary shocks. However, the inflation crisis he warned of arrived a decade late.

Now, Powell, holding the reins of power, faces a macro environment starkly different from that of the past. After five years of inflation running "hot," he must assess the economic outlook amid a tech shock wave of unpredictable scale. Over the past year, he has suggested that AI-driven technological advancements could give the economy more room to grow, with technology tending to lower costs over time. Last month, when asked how to interpret the current economy, he described the same core challenge as 15 years ago. Powell admitted, "We're trying to infer total supply. We're trying to make judgments about what productivity is."