The Jerry Springer Show Comes to the Fed
Most of us remember The Jerry Springer Show which ran on TV for almost 30 years. Episodes include family members yelling at each other, throwing chairs, or engaging in shameful conduct centered on an altercation. Often, these arguments revolved around infidelity, revealing secrets, or bringing some other disgrace to the family.
Something similar happened at the Federal Reserve.
As even casual Fed watchers will remember, Chairman Jay Powell assured the public for months that early inflationary pressures were “transient” and that things were well on his hand and that of the board. Despite persistent inflation in the prices of energy, food, construction materials, autos, etc., he endured well into the fourth quarter of 2021 with this unfortunate term.
He recently reluctantly dropped the term, but by then everyone knew a new cycle of inflation was brewing. Of course, everyone includes the rest of the Federal Reserve Board members, including one James Bullard of the St. Louis Fed.
Bullard, who has a history of speaking his mind, recently said Interview She “[he’d] like to see 100 basis points [increase in interest rates] in the bag by July 1” noting that he was already more fanatical, but dramatically, he wonders what the committee should do.
It shook the consciences of other Fed members, as Bullard was saying things he wanted to keep private. Such tales are not told outside the church.
A round of tutelage quickly ensued, culminating several days later in a televised appearance by former Fed Vice Chairman Roger Ferguson, Jr., who had retired 16 years earlier. Apparently someone thought this could be seen as Dada’s attempt to bring Bullard back into the fold, without the currently active board member publicly rebuking him. Ferguson spoke more in sadness than anger, and said that Bullard was a free agent who was able to speak his mind, he did not speak for the whole family, mistakenly… across the board, and in fact, Bullard, probably very sorry he said such provocative things and he shouldn’t be channeling the family business like this.
Incredibly, Bullard chased Ferguson for almost half an hour. If anyone thought Ferguson’s effort to moderate Bullard’s comments would work, they were completely wrong.
Bullard not only reiterated his earlier remarks, but did so quite emphatically. He claimed that “the Fed’s credibility was on the line.” He also added for good measure that the long-held belief that there was a “Fed Put”, an unofficial but widely held back-stop against stock market declines, did not exist.
It’s almost the equivalent of a Jerry Springer guest at Fed-World throwing a chair at his mother and pushing her off the stage. And he did it all with a sweet smile. happy times.
Going back to the least enigmatic Alan Greenspan, whose oracle-like music stunned congressional committees and investors alike, the chairman of the Federal Reserve has attempted to control the “narrative.” Aware Period. Bullard’s comments stymied an effort to put it mildly.
I don’t know about you, but I’m ready for the next episode.
Dean Smith is Chief Strategist and Portfolio Manager at FolioBeyond.