Jerome Powell will face a completely different economy in a different period

During his first term in office, Jerome Powell undoubtedly became the most dove-headed chairman in the modern history of the Federal Reserve, prioritizing full employment at a time when inflation seemed to be eradicated. In his second term, he may have to do the opposite: prioritize inflation at the risk of sacrificing jobs.

Pivot can be painful for both Mr. Powell and President Biden. The White House praised Mr Powell on Monday for sharing “the administration’s focus on ensuring that economic growth largely benefits all workers.” Nevertheless, economic conditions have been significantly reorganized in the last year alone. Inflation, at 6.2%, is the highest in 31 years. While employment remains 4.2 million below the peak before the pandemic, labor shortages are widespread and wage growth is accelerating. All of this threatens the Fed̵[ads1]7;s 2% inflation target.