Something curious took place a month ago during Powell's semi-annual testimony before a Congress: whereas it was quite clear that Biden was calling Powell and demanding an end to inflation, most other vocal Democrats, and especially the progressives, were warning the Fed Chair that there is hell to pay if the Fed's hikes push the economy into recession.
"What's worse than high inflation and low unemployment?" asked Senator Elizabeth Warren as the Fed chief gave congressional testimony last month.
What comes next is simple: with Democrats facing catastrophic losses in the November midterm elections from voters furious over Biden's inflation, some are starting to warn Powell to expect consequences if rising joblessness is the cost of a Fed error.
To be sure, the economy still looks in reasonable shape with unemployment near a 50-year low of 3.6%, although those are deeply lagging indicators, especially when lipsticked over with the BLS' increasingly more grotesque seasonal adjustments- leading and concurrent indicators confirm the labor market has already snapped; indeed, critics told Bloomberg a recession will be hard to avoid over the coming year, and the path to a soft landing is getting narrower as the Fed steps up the pace of rate increases.
He sees the Fed raising rates to a range of 4% to 4.25% by the first quarter of next year, compared with 1.5% to 1.75% today, which will drive the unemployment rate to 5.5%. Bloomberg Economics also estimates the unemployment rate will peak around 5% in this Fed tightening cycle; meanwhile the odds of a recession according to the median forecast- which exclude such outliers as Deutsche and Bank of America, both of which have made a recession their base case - are approaching 50%. "Even a shallow recession can lead to the unemployment rate jumping by 2 percentage points," said Anna Wong, chief U.S. economist for Bloomberg Econ.
"It is important for the Fed not to overreach and trigger a recession unnecessarily, as part of its effort to bring inflation down," said Representative Hakeem Jeffries of New York, the No. 5-ranked House Democratic leader.
"Lawmakers - especially Democrats - are more prone to threaten the Fed with legislation as unemployment rises," said Sarah Binder, a senior fellow at the Brookings Institution.
https://www.zerohedge.com/markets/democrats-prepare-unleash-hell-fed-chair-powell-coming-recession
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