The renowned economist widely known as “Dr. Doom” believes that Federal Reserve Chairman Jerome Powell needs to be even more forceful if the government wants to successfully control inflation that has been running at decades-high levels.
“I am still waiting for him to act boldly — ‘boldly’ means he has to shock the market,” the former Salomon Brothers economist Henry Kaufman said about Powell in an interview with the Financial Times published Wednesday. “If you want to change someone’s view, if you want to change someone’s action, you can’t slap them on the hand, you have to hit them in the face.”
Kaufman, who predicted the 1966 credit crisis, said the Fed is still “somewhat behind the curve” in its inflation struggle under Powell. This contrasts with former Fed Chair Paul Volcker, who, according to Kaufman, was “ahead of the curve” when he aggressively raised rates to handle the 1970s price boom.
The Fed has hiked interest rates four times this year under Powell, to a range of 2.25%-2.5%. Investors expect more increases as inflation remains well above the central bank’s 2% objective. The Fed will meet three more times this year, in September, November, and December.
Headline inflation rose to 8.5% year on year through July, down from a 41-year peak of 9.1% in June.
