Powell envisions his departure: the Fed faces political tensions and economic challenges

The Federal Reserve is going through a pivotal period. Its chairman, Powell, recently revealed his plan to step down in order to pass on a well-functioning economy. This announcement comes amid notable disagreements within the American institution regarding the direction of monetary policy.

Internal Divisions at the Fed on Future Directions

During a public conference, Powell acknowledged the existence of significant disagreements among Fed members regarding the course of action to take. The institution is not unanimous: some advocate for a more restrictive approach, while others support a more flexible stance. This diversity of views reflects the complexity of current economic issues and the difficulty in reaching a consensus on appropriate measures.

The Real Estate Market: Limits of Monetary Action

Powell also openly addressed a major issue: the housing crisis. He explicitly recognized that monetary policy has limited means to resolve the structural housing shortage. A 25 basis point reduction in interest rates will probably not be enough to significantly improve access to housing for American households. This admission illustrates the boundaries of central banks’ intervention in the face of structural challenges.

Inflation Under Watch: The Role of Tariffs

On the issue of inflation, Powell highlighted a key element often underestimated: the potential impact of trade policy. According to his statements, eliminating tariffs could help quickly bring inflation back to the 2 % target. This perspective reveals how non-monetary tools influence the trajectory of prices.