Fed Chair Jay Powell’s political conundrum is getting more challenging with each new week of 2024.

The year began with markets all but certain that a rate-cutting campaign would begin in March. But those expectations have now fully flipped after multiple surprises to the upside on inflation combined with signs of a still-resilient economy.

The latest signal came Friday when the Labor Department said its Producer Price Index — which tracks the prices businesses pay to manufacture products and services — exceeded forecasts from December to January.

The debate has now shifted to whether the Fed will begin lowering interest rates in June or push the issue later into the summer.

A later timeline won’t necessarily change Powell’s underlying mission of avoiding both a recession and a resurgence of inflation. But it does put the Fed chair on a direct collision course with the 2024 political season.

Atlanta Fed President Raphael Bostic said Thursday he doesn’t expect a cut until the third quarter, a period that includes both major political conventions and ends roughly five weeks before Election Day. On Friday, during an interview with CNBC, he was a little more specific: “Summer time,” he said.

Top political figures on both sides of the aisle have already shown a readiness to sway Powell’s thinking.

Most prominent is the Republican front-runner. Donald Trump appears to see Powell as an adversary and recently said “it looks to me like he’s trying to lower interest rates for the sake of maybe getting people elected.”

Dealing with political forces has long been part of the Fed’s mandate, notes Mark Spindel, the chief investment officer of Potomac River Capital and a Federal Reserve historian.

“That’s Jay’s job,” he said. The central bank’s own credibility, or “Fed cred,” he added, is what’s “really at stake here.”

Powell’s challenge will be to navigate election season forces, including the unpredictable Trump who initially appointed Powell to his current position in 2017 before turning on him.

“Trump’s M.O. is to destroy that Fed cred,” Spindel noted.

In a recent “60 Minutes” appearance, Powell said “we do not consider politics in our decisions.”

The argument for delaying cuts so far in 2024 has been driven by a steady stream of economic data.

The year began with the news that the US economy added 216,000 jobs in December. That pointed to labor market resiliency and was just the first indication that perhaps the Fed’s timeline for cutting rates wouldn’t necessarily need to be tight.

It was followed by a higher-than-expected inflation reading on Jan. 11 that bolstered the case for delay by showing that work still remained on getting prices under control.

The pattern has continued throughout the first seven weeks of 2024. Multiple signs of a still-strong economy have come in alongside a second hot inflation reading that further solidified the Fed’s likely cautious approach to cuts in 2024.

The inflation data in particular raised questions about how easy it will actually be to get prices to the “last mile” of the Fed’s 2% target.

The uncertainty was also underlined this week by new comments from Fed officials following the release of the Consumer Price Index (CPI), which revealed it had risen in January by more than economists expected.

Fed Vice Chair for Supervision Michael Barr said on Wednesday that “January’s report on consumer product index inflation is a reminder that the path back to 2% inflation may be a bumpy one.”

Bostic, who is a voting member of the Fed’s rate-setting committee, said Thursday that he was “not yet comfortable” about the inexorable decline of inflation and that “may be true for some time even if the January CPI report turns out to be an aberration.”

A more dovish reaction came from Chicago Fed President Austan Goolsbee, who soothed market fears Wednesday by saying that a hotter-than-expected reading on consumer prices doesn’t mean the central bank won’t be able to cut rates in 2024.

“Let’s not get amped up on one month of CPI that was higher than it was expected to be,” Goolsbee said.

The most recent formal assessment from Fed officials is a report known as the Summary of Economic Projections (SEP) that currently projects three rate cuts this year without saying when they would begin. Officials will update that assessment at their next policy meeting in March.

And as if the economics weren’t complex enough, Powell and his Fed colleagues are bracing for political pressure to only increase as the year progresses. Trump is expected to be leading the charge.

In a recent Fox Business interview, the likely GOP nominee called Powell “political” and said he thinks the chair “is going to do something to probably help the Democrats.”

Powell is unlikely to face overt public pressure from President Joe Biden. The current occupant of the White House has taken pains to avoid publicly weighing in on monetary policy during his term.

But allies of Biden might not be so inclined. If the Fed can successfully pull off a so-called soft landing (where inflation drops without a recession) that could be good for Democrats who thus far have struggled to sell their economic message.

Some progressives figures like Elizabeth Warren are already openly pushing Powell to cut rates, citing housing costs.

“It’s going to be a painful year for the Fed,”predicted Sahm Consulting founder Claudia Sahm in a Yahoo Finance live interview on Tuesday. “They are already getting it on all sides.”

Powell has repeatedly promised to filter out the noise and cites his own bipartisan record at the Fed as evidence he can do it.

A Republican, Powell was first appointed to the Board of Governors by a Democrat (Barack Obama), promoted to chair by a Republican (Trump), and then asked to stay atop the central bank by another Democrat (Biden).

Both Sahm and Spindel predict Powell will act in an apolitical way in the months ahead as navigating the economy is enough of a challenge.

“I think he’s the right person for the job because I think his political hackles are very good,” said Spindel.

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