The following is an excerpt from our Morning Briefing dated August 30, 2022.

It seems that Fed Chair Jerome Powell recently read former Fed Chair Paul Volcker's autobiography, Keeping At It (2018). Amazon's summary states: "As chairman of the Federal Reserve (1979-1987), Paul Volcker slayed the inflation dragon that was consuming the American economy and restored the world's faith in central bankers."

At his press conference last Wednesday, Powell mentioned "keep" or "keep at it" in the context of staying the tightening course a total of six times:

(1) "We will keep at it until we are confident the job is done."

(2) "The FOMC is strongly resolved to bring inflation down to 2%, and we will keep at it until the job is done."

(3) "We want to act aggressively now and get this job done and keep at it until it's done."

(4) "And in light of the high inflation we're seeing, we think we'll need to … bring our funds rate to a restrictive level and to keep it there for some time."

(5) "So, what that tells us is that we need to continue, and we can keep doing these, and–[as] we did today–do another large increase as we approach the level that we think we need to get to, and we're still discovering what that level is."

(6) "And we have to get back to that [i.e., 2% inflation rate] and keep it for another long period of time … [T]he record shows that if you postpone that, the delay is only likely to lead to more pain."

In Friday's QuickTakes, we noted that Powell mentioned the words "pain" or "painful" seven times in his presser. He did so in the context that bringing inflation down with tight monetary policy might cause a recession, but the pain will only be worse later if the Fed doesn't step on the monetary brakes now.

Furthermore, Powell mentioned the word "restrictive" 12 times in his presser, in the context that, at 3.00%-3.25%, the federal funds rate is "probably into the very lowest level of what might be restrictive." He warned that "there's a ways to go." He stated that the FOMC needs "to move our policy rate to a restrictive level that's restrictive enough to bring inflation down to 2%, where we have confidence of that." He said that once the federal funds rate is at a restrictive level, the FOMC will have "to keep it there for some time."

During his previous presser, on July 27, Powell mentioned the word "restrictive" just three times, and he stated (once) that restrictive monetary policy would mean a federal funds rate "somewhere in the range of 3 to 3½ percent" by year-end.

By the way, at that July press conference, Powell sounded relatively dovish: "As the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation." Likewise, at his June presser, Powell said, "Clearly, today's 75 basis point increase [in the federal funds rate] is an unusually large one, and I do not expect moves of this size to be common."

But the FOMC raised the federal funds rate by 75bps at the June, July, and September meetings of the committee, to 3.00%-3.25%. Another 75bps hike at the November meeting would take the range up to 3.75%-4.00%.

Powell now has completely crossed over to the dark side.