The World In A Week – Fowl play

Written by Shane Balkham.

The release of October’s US consumer price index (CPI) data showed that prices rose at their fastest pace since 1990. This figure was above expectations and reflects the ongoing impact of supply shortages. US inflation now sits at 6.2% year-on-year and is looking less transitory with each monthly reading, while political pressure is building for policymakers to act more aggressively.

Not wanting to miss an opportunity to increase his beleaguered approval rating, President Biden used the sharp tick up in inflation to add pressure on Congress to pass his $1.75 trillion spending bill. Biden’s claim is that 17 Nobel Prize winners in economics have said that his plan will ease inflationary pressures. This has been countered by some Republicans who see a huge injection of spending will make matters worse. The partisan politics of the US are not getting any better, which adds further pressure on the President for his nomination for the next Chair of the Federal Reserve.

Earlier in the summer, Jerome Powell looked to have a second term secured, however some unpalatable trading from two senior officials has weakened his position. We know that he has had his discussion with the President, but last week Joe Biden also met with Lael Brainard, an incumbent Governor of the Federal Reserve. This is important, as a new head of the Federal Reserve is an unknown quantity and will affect the market expectations for interest rate rises next year.

2022 already looks to be a difficult year without the weight of a new Chair at the Federal Reserve. There is significant political tension for President Biden, coupled with the Midterm elections less than a year away, suggesting the decision is not as clear as it was a few months ago. Thanksgiving is next week, and the decision over the Chair of the world’s most important central bank was promised to have been delivered before then. At this point, Biden cannot afford to look like a Turkey.

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