"New Fed News Service": Powell unexpectedly became a "folk hero" and was supported by the voting committee this year

# Source: Wall Street Insights

## He Hao

Nick Timiraos wrote that Federal Reserve Chair Jerome Powell has unexpectedly become a "folk hero", with a number of memes circulating online praising his stewardship of the Fed. In an interview, Anna Paulson, a voting member of the Federal Open Market Committee (FOMC) this year and President of the Federal Reserve Bank of Philadelphia, stated that she supports keeping interest rates unchanged at the upcoming meeting. However, she would be open to a modest interest rate cut later this year if inflation data shows convincing signs of easing price pressures or if the labor market deteriorates unexpectedly. Timiraos characterized Paulson's stance as dovish.

The renowned financial journalist, known as the "New Fedwire", Nick Timiraos wrote that Federal Reserve Chair Jerome Powell has unexpectedly become a "folk hero", with a number of memes circulating online praising his stewardship of the Fed. Anna Paulson, President of the Federal Reserve Bank of Philadelphia, knows this because her 20-year-old son sends these memes to her.

Play Video

In an interview on Wednesday, Anna Paulson, President of the Federal Reserve Bank of Philadelphia, said, "A lot of people are impressed by his leadership, and I count myself among them." This marks Paulson's first interview with a national media outlet since taking office last July.

In his latest article, Timiraos mentioned that Powell revealed on Sunday that he is under a criminal investigation related to the renovation of the Federal Reserve's headquarters in Washington. However, Powell stated that the investigation actually concerns monetary policy and the intentions of former President Donald Trump to lower interest rates.

In response to this, Paulson said, "His statement was very powerful, and I think it speaks for itself. Jay Powell has been a very effective chair, as have his predecessors. The Federal Reserve has had very strong leadership for decades, which I believe is beneficial to the American people."

Having previously served as the research director at the Federal Reserve Bank of Chicago, Paulson has been attending FOMC meetings since 2019. From this perspective, she finds it impressive that Powell is able to foster broad and open discussions. She said, "You need to create an environment where people can make decisions that are good for the institution and the economy. Part of the chair's job is to navigate that process."

Timiraos pointed out that Paulson echoed the views of several of her Fed colleagues this week, who also endorsed Powell's integrity and leadership. At the end of last year, these Fed officials were divided on how to set interest rates, and Powell faced growing opposition when pushing for interest rate cuts.

Currently, Paulson stated that she agrees with the mainstream view among markets and policymakers that there is no need to rush for another interest rate cut. As a voting member of the FOMC this year, she supported the Fed's three consecutive cuts to the short-term benchmark interest rate, with the most recent one in December last year, lowering the rate range to 3.5%-3.75%.

Paulson said she expects substantial progress in inflation's return to the Fed's 2% target by the end of this year. Nevertheless, she would also be comfortable keeping interest rates unchanged at the upcoming meeting scheduled for January 27-28. She believes that current interest rates are still slightly above the "neutral level"—the rate that neither stimulates nor restrains economic growth—which at this stage helps to finish the last mile of bringing inflation down. "I want the restrictive stance of monetary policy to continue to work its way through the economy to get inflation all the way back to 2%."

Nonetheless, Paulson also indicated that she might support a modest interest rate cut later this year under two scenarios: first, if inflation data confirms her judgment that price pressures are easing; second, if there are signs of an unexpected deterioration in labor market conditions.

Paulson is paying special attention to the January price data to be released next month, as businesses typically reset prices at the start of the year. In other words, if businesses plan to raise prices significantly, it will soon show up in the data.

If her baseline outlook holds true—steady economic growth, falling inflation, and a stable labor market—then policy should be at the neutral level, which Paulson believes is slightly below the current rate.

Timiraos stated that Paulson's current views place her in the dovish camp on the FOMC, as she sees the risks to the labor market as "slightly higher" than the risks of stubbornly high inflation.

Last year, approximately 95% of new private-sector jobs in the United States were concentrated in a single industry—healthcare and social assistance. In response to this, Paulson said that for an economy to truly feel robust and healthy, it should not be creating jobs in just one sector.

Paulson noted that research suggests that in phases like the current one, where the labor market is cooling but economic output as measured by GDP continues to expand strongly, labor market signals tend to prevail in the end. But she also emphasized that past experience is no guarantee of future outcomes. For example, if the economy is on the cusp of a productivity boom, economic activity could remain strong with less demand for labor.

Paulson said that the biggest economic surprise for her in 2025 has been the extent to which the labor market has cooled, but this process has not accelerated—which is truly unusual. She added, "Labor markets can crack quite quickly. So any signs of cracking rather than bending would be a signal I would be highly attuned to."

Paulson stressed that it is crucial for the Fed to ensure that inflation returns to the 2% target. However, compared to some of her colleagues, she is less concerned about the inflation outlook, as she sees signs that the rise in goods prices last year may reverse course this year. Business executives and owners have indicated that they are more focused on maintaining market share than in previous years, and thus are more cautious about raising prices and losing customers. "Demand is not so strong that businesses can easily raise prices. Companies are being very careful and deliberate right now."

### Risk Warning and Disclaimer

The market is risky, and investment requires caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situations, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are in line with their specific circumstances. Any investment decisions made based on this article shall be at the user’s own risk.