Why Federal Reserve Chair Jerome Powell’s Testimony Is a Wake-Up Call

Jerome Powell’s speech before the House Banking the Committee last week was an important wake-up call. His forthright appraisal of U.S. monetary policy, especially its efficiency in boosting growth, sent shockwaves through financial markets and organisations throughout the globe.

The Federal Reserve chair is undoubtedly the most influential economic figure in Washington — though he is also one of the few whose are not beholden towards Wall Street or major corporations for their posts. He has been appointed by the president and affirmed by Congress on merit rather than personal ties or political favors.

Powell’s statements about low interest rates being ineffectual in fostering economy have been criticised as “dangerous” by numerous economists, including past Fed chair Janet Yellen. But they are merely a realistic evaluation of what we know from years of encountering a central bank that has proved unable to reach its inflation objective of 2 percent per year, much alone full employment or price stability.

For years past there has been considerable gnashing of teeth about what would happen if interest rates got too high — but no one appears to be talking about that would happen if they stayed too low for too long. That is because it is acknowledged that hiking interest rates might generate financial turbulence and economic misery, especially among those who rely on