"‘Hawkish Powell’ Should Not Delay Tightening," Says WSJ... Bloomberg Predicts "He Will Change His Words Again"

"Powell to Face Criticism if Soft Landing Fails"
Bloomberg Points Out "Overreliance on Individual Data"

After Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), signaled additional interest rate hikes on the 7th (local time), market volatility expanded, and the Wall Street Journal (WSJ) published a commentary stating that the Fed must continue its tightening stance without wavering.

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In an editorial titled "Jerome Powell's Full-Speed Charge," WSJ stated, "The market is trembling, but the Fed Chair knows that now is not the time to delay (rate hikes)." The newspaper pointed out, "Monetary policy has long and variable lags," and "If the Fed fails to achieve a soft landing, critics will undoubtedly blame Powell."

Chairman Powell appeared before the Senate Banking Committee hearing that day and said, "Recent economic indicators have all come out stronger than expected," suggesting "the terminal rate level may be higher than previously anticipated." He added, "If the overall data require faster tightening, we are prepared to increase the pace of rate hikes," leaving open the possibility of a big step. Immediately after Powell's hawkish (monetary tightening preference) remarks, the U.S. financial market fluctuated. On the New York Stock Exchange, the Dow Jones Industrial Average fell 1.7%, and the yield on the 2-year U.S. Treasury note, sensitive to monetary policy, surpassed 5% for the first time since 2007.

WSJ emphasized, "The expectation that inflation will not persist was wrong, and declaring victory over inflation is also mistaken," adding, "Powell must continue to do what is necessary until the beast called inflation, which does not seem dead now, is certainly dead."

There are also critical voices. Bloomberg published a column titled "Jerome Powell's Remarks Are a Sideshow," stating, "When Friday's new job statistics come out, the remarks could change again," and pointed out, "It is important to remember that Powell can change his mind." Experts expect that U.S. job growth slowed to 224,000 last month. Although Powell hinted at the possibility of a big step that day, if the slowdown in employment indicators is confirmed, the tone of his comments regarding monetary tightening could weaken again. The media criticized, "It is becoming increasingly difficult to pay attention to hawkish remarks every time a single data point is released."

Mohamed El-Erian, Chief Economic Adviser at Allianz, also pointed out in a column published on Bloomberg that day, "Powell's comments trigger unstable market volatility." He added, "The Fed currently lacks comprehensive judgment regarding the risks its policy poses to the variable domestic and international economy," and criticized, "There is no medium-term strategy (related to monetary policy), and excessive reliance on data is causing overshooting."

Finally, he emphasized that the Fed should not dismiss such market volatility as 'noise.' He criticized, "Concerns about a recession have arisen due to mistakes the Fed made over the past two years, and the order of financial markets has collapsed," adding, "The greater the excessive volatility, the higher the risk of accidents in the economy and markets."