Washington Faces Dilemma: Talking Too Much or Too Little Could Both Affect the Market

BlockBeats News, August 28th – Analysts and investors believe that this speech will be an early test to see if Powell is willing to adapt to a growing external concern about his policy plans. The Federal Reserve has now missed its inflation target for 65 consecutive months, with very limited progress over the past year and a half. Powell has repeatedly stated his commitment to achieving the Fed's inflation target since taking office, but has not provided specifics on how to achieve it, leading to calls from the market for a shift in the Fed's policy focus.

Gregory Daco, Chief Economist at EY-Parthenon, said that Powell's previous statements have been very vague, "People are worried about the Fed's independence," and are also concerned about whether Powell is unwilling to discuss the possibility of raising interest rates to avoid angering Trump and his administration.

Daco said: "He must be more cautious in his communication, not to give the impression that the Fed may engage in more coordination and cooperation with the Treasury, or that he is influenced by the President's demands for rate cuts. For any new Fed chairman, these are not good signals." Powell must tread carefully. Saying too much could trigger expectations that are hard to reverse, or at least make people uncomfortable; saying too little could damage credibility and cede influence to others at the Fed who can provide more detailed arguments. In either case, the market may experience volatility.