Far from Camelot

While they are not duking it out like King Arthur and the Black Knight in Monty Python and the Holy Grail, President Donald Trump and Federal Open Market Committee Chair Jerome Powel appear to be at odds.  Both sides are searching for their own holy grail, and their paths keep crossing.

America’s Commander in Chief has an implied holy grail of making sure the economy is great again.  Who wouldn’t want that?  While Atlas does not adhere to the belief that occupants of the White House have a tremendous influence on the overall economy, it cannot be said that they don’t have any.  Perhaps more importantly to them, their legacy is often tied to the performance of the economy. 

On the other side, the Federal Reserve’s dual-mandate holy grail was handed down by Congress in 1977.  Here, they are charged with price stability (which they define and reaffirm often as a 2.0 percent inflation rate) and full employment (a moving target dependent on the economy’s health).  While they have made tremendous progress toward the 2.0 percent target, they don’t seem to be there just yet, and the most recent Consumer Price Index Report from the Bureau of Labor Statistics threw out an insult this week like one of the French sentries in the Monty Python classic; this measure of inflation’s trend reaccelerated.

President Trump has not minced words, reiterating once again this week that he is not fond of the job Powell is doing, even throwing out his own insults of the central banker at a press conference.  In return, the central banker remains cool, unmoved so far by the reacceleration in inflation.  One can almost hear him shout, “merely a flesh wound!”

Monty Python’s classic ends anticlimactically.  The feud between America’s leaders may do the same.  Jerome Powell’s term ends in May.  The final scene could be nothing more than a quiet “au revoir” as he packs up his things and exits the nation’s capital.  Of course, if inflation continues to rise and political pressure mounts, Powell’s departure could be less of a quiet farewell and more of a strategic retreat.   The next chair may inherit not just a mandate, but a battlefield.  And like the knights of Monty Python, the quest for economic stability may prove to be both absurd and unending.