Jerome Powell took the stage at Jackson Hole this morning and said—well, not much.
He talked about "neutral," repeated "data dependent," and recycled "not on a preset course." It was the familiar Fed script. Yet markets immediately rallied nearly 2%.
That's the disconnect.
Powell stood still.
The market surged.
He tried to sound cautious.
Traders heard surrender.
He didn't promise a pivot, but he didn’t resist one either.
In a cycle like this, neutrality isn’t neutral — it’s permission.
FedN o Longer Leading . . . It's Reacting.
Analysts and investors listen for intent and scan for absence.
Powell says nothing — so they price in everything.
Powell all but confirmed the 2020 framework is gone.
"Average inflation targeting"? Gone.
"Shortfalls" language on employment? Gone.
Without fanfare, the Fed has reverted to traditional inflation targeting — minus the admission of failure.
This wasn’t just a messaging error.
Powell's Most Damaging Moment Wasn't a Rate Hike — It Was a Word
Calling inflation "transitory" in 2021 wasn't just a misread; it was a strategic error that delayed action, eroded trust . . . and broke the Fed's grip on credibility.
It was a wager — a belief that tone could delay action, and credibility could carry the weight of denial.
It didn’t. When reality broke through, Powell didn't steer. He slammed the brakes — launching the fastest rate hikes in 40 years. What followed wasn't stability. It was shock.
SVB Wasn’t a One-Off. It Was the Moment the Fed’s Illusion of Control Cracked
Powell didn't mention Silicon Valley Bank (SVB).
He didn't need to. SVB collapsed in March 2023 under the weight of rate risk the Fed created — and failed to supervise. The bank held "safe" assets: long-dated Treasurys, devalued by Powell's hikes.
The Fed had the data. It saw the stress. It delayed. It deflected. It stayed silent.
Policy Wasn't Even Restrictive Until 2023
Yes, rate hikes began in March 2022. But real tightening didn't start until early 2023 —when rates finally outpaced inflation.
That's not a long cycle.
It's barely begun.
Powell's language of "progress" skips over the fact that we're only 18 months into true monetary restraint.
Markets know it.
Economists flagged it.
Powell hinted at it.
The Fed's own research confirms it.
Despite months of hawkish rhetoric, inflation is falling. Powell noted today that core PCE (Personal Consumption Expenditures Price Index, Fed's preferred measure of inflation), sits at 2.9%.
Goods inflation has ticked up. Services are stabilizing.
Even Powell admitted tariffs are "clearly" lifting prices — but headline CPI (Consumer Price Index, widely used to measure inflation) has softened anyway.
That mismatch is telling. The Fed's own models over-forecasted inflation.
Markets are pricing that in. Powell didn't push back. The market took it as license.
Tariffs Helped. But Growth Still Drives the Deficit
Tariff revenue surged to $136 billion this fiscal year. But July's deficit still rose 19% year over year to $291 billion. The S&P affirmed U.S. credit at AA+, citing tariff gains—but warned spending is outpacing any revenue improvement.
The real lever is growth. The Congressional Budget Office (CBO) estimates show that even modest GDP (Gross Domestic Product, total value of all goods and services produced) acceleration — say, toward 3% — could swing long-term deficits by trillions. Tariffs help.
But they don't solve.
Powell didn't address that today. No plan. No push. No urgency.
Politics are Closing In
Trump quickly nominated former Treasury official Stephen Miran to fill the Fed seat vacated by Adriana Kugler.
Miran is no technocrat. He's a direct challenge to Powell's message-first approach.
Even The Babylon Bee didn’t miss the moment: "Powell says he won’t cut rates until he's sure it won't help Trump." Satire, but with an edge.
Secretive by Design, Unaccountable by Default
The Fed is the most powerful and least accountable institution in American life.
It’s not just out of step — it's out of reach.
It sets the cost of credit, moves markets, wields unchecked economic power — all behind closed doors. If Congress wants to restore trust, it won't just tweak rules. It'll rewrite them.
Five Structural Reforms Congress Needs to Undertake to Rebuild the Fed:
Fire the Referee — Strip bank supervision from the Fed. It can't hike rates with one hand and supervise banks with the other. That's not dual responsibility. It's institutional malpractice. SVB showed what happens when the Fed polices itself.
Put a Cop Inside the Vault — Give the Fed a real, independent inspector general. Right now, it investigates itself. Replace internal reviews with a watchdog who has subpoena power, public reports, and authority to fire officials for cause.
Shut the Back Door — Cap the Fed's emergency powers. Pandemic tools have become permanent habits. Buying corporate debt and moving trillions without Congress isn't policy — it's a workaround.
Break the Black Box — Require competing Fed forecasts. Force public disclosure of best-case, middle-case, and worst-case scenarios — with clear probabilities.
No more hiding behind assumptions.
Break Up the Club — Put real economy voices on the board. Add permanent rotating seats for business leaders, workers, state treasurers, and financial veterans. If Fed policy moves every corner of the economy, every corner deserves a seat.
Richard Torrenzano is chief executive of The Torrenzano Group which helps organization takes control of how they are perceived™. For nearly a decade, he was a member of the New York Stock Exchange management (policy) and Executive (operations) committees. His second book, "Command the Conversation: Next Level Communications Techniques," was just released. He is a sought-after expert and leading commentator on AI, cyber and digital attacks; financial markets; brands, crisis, media, and reputation.
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