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Dream team Powell and Yellen screwed it up

Jerome Powell and Janet Yellen

The chairman of the Central Bank and the US Secretary of the Treasury misjudged inflationary trends.

(Photo: Bloomberg)

U.S. Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell had everything they needed to work together successfully. But the dream team blew it: US inflation rose to a new record high of 8.6 percent in May.

Yellen and Powell have known each other for a long time since they were together at Fidel, where Yellen Powell was a pioneer. As a result both are experienced in monetary policy and Powell is also experienced in monetary policy. Both are considered to be balanced and integrated, and Yellen also has a good reputation as an economist.

Cooperation between monetary and monetary policy is crucial: the central bank should be politically independent, but the two spheres are so closely intertwined that nothing sensible can come about without mutual understanding between the actors.

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