Powell’s “extraordinary” statements Jackson Hall reveal that he is besieged in Trump’s tariff and deportation, and he risks a mistake in the 1970s, says economist Saluk

Powell pointed out that although labor markets are still balanced, they are “a kind of strange balance that results from a noticeable slowdown in both supply and demand for workers.”

He added: “This unusual situation indicates that the negative risks of employment are rising.” “If these risks are fulfilled, they can do this quickly in the form of sharply higher hairstyles and high unemployment.”

Customs Slok luck In an interview immediately after speaking that this type of language was “confusing”.

“Including the word” curiosity ” – I mean, this is just an extraordinary expression,” note.

Markets rejoice In a simple hint, Powell gave he would reduce interest rates at the next Federal Reserve meeting. However, Slok has argued the speech signals that Powell sees something deeper happening in the labor market: Deportation and migration suppression Falsifying the employment offer. In his opinion, it can make inflation more difficult.

The Federal Reserve Bank is gathered by politics

Powell Powell’s letter thread between two powers: Growth And high enlargement stubbornly. On one side, he admitted the labor market and the high risk of recession, but on the other hand, he informed the definitions and the weak dollar as potential new inflation drivers.

Slok added that Powell now puts more weight in slowing the labor market, but he also left the door open to find out what the recruitment report will say in August.

“It was a very bilateral speech, but it is still tending to focus on fears that the labor market has slowed down,” said Slok.

But he added that Powell was frank about what could happen wrongly: definitions and commercial wars.

Powell warned in his stomach notes: “It is also possible that upward pressure on the prices resulting from the customs tariff may stimulate the dynamics of permanent inflation, and this is a risk to its evaluation and management.”

Slok said that the risk is real, and that the definitions will have a “greater” effect on inflation than we have seen so far.

“If you look at this profit season, we have a number of companies, including Timing“We say the prices of its products are rising. So I think it is justified, from the Federal Reserve Perspective, to anxiety about the upward risks to inflation.”

Deportation as an inflationary shock

Slok went further, saying that the “curious” balance line, which probably reflects the effect of collective deportation. He said that the removal of workers pay wages in industries such as agriculture, construction and hospitality.

Slok indicated that the administration has a goal to remove 3000 illegal immigrants per day, or a million every year. This would have “of course” to have consequences not only on the demand for employment, but the display of employment.

He said that the result is the inflationary pressure: “If you reduce the labor supply, this is really the same as the motive for the economy as the tariff. Definitions lead to high inflation and low gross domestic product.

Slok warned that Powell might be sleeping in classic “to stop” trap.

in The 1970s, The Federal Reserve has reduced interest rates shortly after primary inflation, only to see prices rise again with oil shocks and wage demands in the economy. Political makers have forced to criticize backup rates, transfer the United States to frequent stagnation and destroy the credibility of the Federal Reserve Bank for years.

“The danger today is that we can see the same dynamic repetition,” said Slok. If the inflation begins to climb again after a rate is reduced, the Federal Reserve will have the opposite of the path – and in the worst cases, start walking again. ”

At that time, political pressure played a decisive role. President Richard Nixon Hardly The CBCs Capital Arthur Burns to reduce rates before the 1972 elections, a step that blames historians to ignite the second wave of inflation in the 1970s.

Today, President Donald Trump Pushing For aggressive price discounts and his commercial war, Powell was placed in a remarkable similar connection. Powell is forced to achieve a balance between the political demands of a more flexible policy against the dual mandate of the full moon of maintaining the stability of prices and the maximum employment.

The bottom line

Slok was keen to note that the Powell speech book could not formulate with Trump into consideration. However, he admitted that political overlap is inevitable. With the definitions and deportation that feeds inflation unilaterally, the weak economy pulls the other direction, narrowing the Powell selection group.

“Both definitions and deportation lead to the same effect on the economy, that is, high inflation and the growth of the slowdown gross domestic product. This is what the consensus expects at the present time.”

In Jackson Hall, Powell described this position as a “curious” balance. But for Slok, it looks like a trap.