Biden To the Fed: Do Your Job!

The post-Global Financial Crisis ("GFC") environment has long been plagued by low growth and deflationary pressures. Supported by by ultra-low interest rates, growth hungry investors have for years piled into risky assets like cryptocurrency and companies with questionable "growth-at-all costs" business model. Profits? What's that?...Investors merrily did so because of the justified belief that the Federal Reserve had their backs. The stock market is, of course, not a part of the Fed's dual mandate of stable prices and maximum employment. However, successive Fed regimes have been wary of any negative feedback loop a declining stock market might have on the real economy and typically responded to market volatility with injections of liquidity. The Fed's obsession with the so-called "wealth effect" has contributed to growing economic inequality, even by the Fed's own admission. But suddenly, some would say predictably, inflation is back after four decades (admittedly, this blog was firmly in the transitory camp). The Consumer Price Index rose to a 39-year high of 7.1% in December, well above the 3.2% average over the past 42 years and the 1.8% per annum since the GFC. 

Source: The St. Louis Fed, Mantabye

Now the Fed has to choose between its Congressional duty and Wall Street. Quite the quandary! President Joe Biden, for one, has no confusion about where the Fed's focus should be as inflation becomes voters' biggest concern. He helpfully reminded Fed Chair Jay Powell of his duties this week:

And Wall Street may be starting to feel that the Fed might actually listen to him:

Source: Yahoo Finance, Mantabye