Powell’s Vindication

Jerome Powell was right. With just weeks left in his tenure, the Fed chair’s analysis is playing out exactly as predicted.

Interest rates remain unchanged (between 3.50% and 3.75%) and projections still point to a single rate cut for 2026, just like December. But don’t let that fool you — yesterday’s monetary policy meeting was packed with drama.

Tariffs, Iran conflict, and artificial intelligence… The US economy faces a historic supply shock whose full consequences remain unclear, but Powell tried to break it down this way:

Tariff effects are already showing up in inflation data, with core PCE (excluding food and energy) hovering near 3% — and this might just be the beginning.

Energy market disruptions from the Iran conflict are probably temporary, but the Fed has to take them seriously (inflation already sits well above the 2% target and they got burned once before during Covid).

AI’s deflationary promise remains unproven. Sure, service costs might drop eventually, but right now, data center construction could actually fuel inflation.

Bottom line: it’s complicated and getting worse. The Fed now faces the dreaded double whammy of rising inflation and rising unemployment (4.4% in February).

Add some political intrigue with a tense handoff between Powell and Warsh, and you’ve got all the ingredients for a Netflix series. Jerome and Kevin might have to coexist starting May 15 (Jerome won’t leave the Board of Governors until the investigation against him is “well and truly over”).