Fight for the Fed - We're all aware of the beautiful romance that's blossomed between JPow and his treasured money printer. But now, that romance is being challenged.
Lael Brainard, former MIT professor with a PhD from Harvard and long-time Undersecretary of the U.S. Treasury for International Affairs, is a Member of the Federal Reserve Board of Governors, where she has sat since 2014. As was confirmed earlier this week, Brainard is the top challenger for JPow's thrown. Reports emerged on Monday that Brainard sat down to interview for the Fed Chair position during her visit to the White House last week.
This can't be good news for JPow, but it's great news for Congressional Democrats that aren't the biggest fans of Powell. Brainard is thought to be more dovish when it comes to interest rates, meaning she would be more in favor of expansionary monetary policy, although, in practice, her economic views often align with the current king. Where they differ, and why Congressional Democrats largely support Brainard, is her much tougher stance on bank regulation.
The only registered Democrat on the Fed's Board of Governors, Brainard attracted attention immediately from her respective party. You'd have a hard time calling Powell hawkish since late 2019, but advocates for Brainard support her views on bank regulation and believe she is more likely to expand the Fed's involvement in mediating racial and other economic inequalities.
JPow's term ends in February, but he could very well be up for re-nomination, having historically held bipartisan congressional support. Sen. Elizabeth Warren would beg to differ, but I worry she hasn't considered that "LBrain" just doesn't have the same ring to it.
PPI - Grab some drinks, strike up the band, and get ready to celebrate - economists actually got something right. October's PPI report, measuring inflation from the producer side of the coin, came in at 0.6% for the month, exactly in line with estimates. While they can rejoice in being right for the first time maybe ever, this comes for a month that saw the steepest annual increase in over a decade. PPI grew 8.6% from October of last year, tied with that of November 2010.
While you might be thinking (or screaming) to yourself that this is definitive proof that the inflationary environment we're currently in is not transitory, but of course, it's not that simple. Splicing the data reveals goods price leaped 1.2% for the month while services just 0.2%. This would suggest the inflation we're seeing remains largely related to supply chain issues and a run up in global commodity prices (also, largely because of those supply chain issues). Moreover, 80% of the services increase can be attributed to one line item: autos & auto parts.
So, while this is definitely not ideal, it's no reason to get all doom and gloom on me now. Economics is a challenging, complex topic that's largely more art than science, and as the saying goes, beauty is in the eye of the Fed Chair.