Please note Powell revived from the dead, the word “Transitory”. 
I missed this real time. But while researching past statements regarding inflation, I stumbled on a Bloomberg article Powell Revives ‘Transitory’ With Remarks on Tariff Inflation written March 19, 2025.
Fresh off the Federal Reserve’s new economic projections showing officials expect higher inflation and slower growth this year, Chair Jerome Powell said Wednesday it’s his “base case” that any bump in price-growth due to President Donald Trump’s tariffs policy would prove transitory.
To be sure, Powell emphasized the Fed “really can’t know” and said officials will have to see how tariffs ultimately play out. Still, the remark conjures up memories of the Fed’s slow response to the pandemic-driven inflation surge.
“It’s still the truth if there’s an inflationary impulse that’s going to go away on its own, it’s not the right policy to tighten policy,” Powell said. “Because by the time you have your effect, you’re in effect, by design, you are lowering economic activity and employment.”
Base Case Is Transitory
Given transitory is the base case, that means the Fed will be slow to act on it when it happens.
It might be a year before the Fed realizes the inflation isn’t transitory.
Perhaps this is answer to my puzzlement earlier today when I posted Despite Hot Inflation, the Market Still Expects a Fed Rate Cut in June
There is still a 78.6 percent chance of at least a quarter-point cut in June.
How to Make Sense of This
If the Fed does cut in June for no reason other than it has penciled one in (this is certainly possible), I would expect long-term yields to rise, and they did.
The other possibility is the market expects a recession sooner rather than later. As for the long bond in this recession scenario, it makes perfect sense for worries over long-term budget deficits.
Ta Da! It’s Transitory
Now it all makes perfect sense. The jump in PCE inflation is transitory and whatever inflation comes from Trump’s tariffs will be transitory as well.
And since transitory is the base case, it makes perfect sense for the market to expect cuts that the Fed penciled in to happen.
As usual, the market front runs Fed expectations.
Another Way Powell Could Be Right
Powell has two chances to be right. The first is transitory happens and we all live happily forever more.
The second way is Trump’s tariffs and other economic policies crash the markets bringing asset price deflation in a big recession coupled with crashing interest rates.
Alternatively, we could have a huge bout of stagflation with Powell looking like a fool for reviving the word.
I discount the happy forever more scenario. But number two and the alternate are both possible.
This is why I haven’t answered repeat questions one where long-term yields will be at the end of the year.
Related Posts
March 27, 2025: Second Massive Wave of Imports Shows More Tariff Front Running
The advance import-export data for February is another doozie. Three charts.
March 27, 2025: US Debt Will Grow to a Staggering 156 Percent of GDP by 2055
If Congress extends the TCJA tax cuts with no offsetting savings, the deficits will surge.
March 28, 2025: GDPNow Nowcast Takes a Steep Dive Into Negative Territory, What Happened?
Another blast of imports and a poor spending report impacted the Nowcast.
Regarding the surge of inflation in the lead chart, please see Hot PCE Inflation Data and Weak Spending Sure to Give the Fed Headaches
There is no good news on inflation or spending in recent data.
If your base case is stagflation, then this post, including the above links makes a nice case.
I am not convinced of that outcome, however.
No one really knows what Trump will do or the ultimate impact of a huge wave of tariffs if he goes ahead.
It’s all good and will only hurt for a little while.
Trust me.
Again.
In 2020 there were about 73 millions boomers. The clock is ticking. In the next two decades they will move to the next phase. They cannot take anything with them. The boomers are not immortal. Superstates are not immortal either. To reduce risk Trump transferred responsibilities to the states and to the Europeans. He cut bureaucrats in the gov. He is fully committed to cutting debt. He brought industries back to reduce hazard, blackmails and to bring jobs back to the US from Canada, Mexico and China. The 40 years RE bubble is wobbling. In the next two decades there will be a shift from RE to industries. Tariffs protect those industries. Tariffs, higher income tax, a smaller gov and lower interest will accelerate debt reduction. In the next few decades one superstate might breakdown and disappear. Flexibility and taking preemptive steps today to survive in 2050 is a must. Is it clear ???
You have a flawed assumption about boomers transferring wealth to young people. First, 80% of the wealth is controlled by 20% of the population. Most boomers are poor and barely get by on social security.
What assets the non-wealthy boomers have will be taken away and liquidated by the government to pay for elder care and hospice. Clearly you know nothing about how this all works but the care at the end of your life provided by government isn’t free, they seize your assets unless you’re smart enough to structure your assets in a trust. Most don’t know how to do that.
https://eldercarematters.com/blog/nursing-homes-your-assets/
Most boomers aren’t poor. 77% of them own a house and they have other financial assets. If centrifugal forces break the US apart, the top 1% will be poor.
Go ahead & put your assets in a trust – Medicaid still won’t pay your nursing home bills.
Yet another justification for physical gold and loosing it in a boating accident.
I’ve been using the moe accurate word, “entrenched”, since 2021. The goverment and other scammers always use words that are the exact opposite of what they are actually selling. “Collateralized Debt Obligation” is my all time favorite, where a collection of non-collateralized loans were bundled into securitization products.
This is the most probable trend of inflation given no change in reserves:
08/1/2024 ,,,,, 0.008 bottom
09/1/2024 ,,,,, 0.027
10/1/2024 ,,,,, 0.04
11/1/2024 ,,,,, 0.054
12/1/2024 ,,,,, 0.069
01/1/2025 ,,,,, 0.086
02/1/2025 ,,,,, 0.082
03/1/2025 ,,,,, 0.072
04/1/2025 ,,,,, 0.092
05/1/2025 ,,,,, 0.096
06/1/2025 ,,,,, 0.103
07/1/2025 ,,,,, 0.101
08/1/2025 ,,,,, 0.110
09/1/2025 ,,,,, 0.113 top
10/1/2025 ,,,,, 0.107
11/1/2025 ,,,,, 0.108
12/1/2025 ,,,,, 0.085
01/1/2025 ,,,,, 0.097
For those of you who aren’t deranged, Barry Knapp just did an excellent show on the Mining Stock Daily podcast where he summarizes his macro views. Lasts about 35 minutes. Per Barry, Powell is probably right this time. I had to listen to it twice. Barry’s mind runs faster than mine by a long shot. I highly recommend. So much of the news is unimportant noise.
What do you do if you get lost driving? Back up and retrace your steps. That’s what the FED needs to do.
1966 Interest Rate Adjustment Act | Seeking Alpha
One thing we can count on: THE YAPPING will continue to be confused and distorted. This will NEVER END.
But, the party divides will deepen with the Liberals sharpening their attacks and the conservatives seemingly unsure WHAT to say (I am talking PARTY LEADERS, NOT the Pres.).
The Schumers and McConnells are appearing nut-less with nothing much to say.
It’s simply “Rinse; Repeat” with this Guy!
South Korea, China, Japan agree to promote regional trade as Trump tariffs loom
Read more at:
https://economictimes.indiatimes.com/news/international/world-news/south-korea-china-japan-agree-to-promote-regional-trade-as-trump-tariffs-loom/
If your retailer is selling an imported product at $10 each, it may decide that there would not be enough demand at a post tariff price of $12.50 and simply stop carrying the item. You may still find the product online but at a much higher price than you were paying before. I don’t call that transitory inflation. But it may well result in product substitution.
OR: people will do without that $10 item and many other useless $10 items and apply the savings to MUST-HAVES, such as Milk, Meat, paying insurances and paying off debts if they can.
The others will default on their short-term debts. We are in for a REAL WORLD stagflationary spiral.
It would be nice to see a drop in choices. It would make better use of our limited resources, have more healthier choices, and less crap in our food abundance, and help to stop the “I Want Crowd” from feeling as though they can have anything they scream for.
I am thinking a lot of value could come from fewer, but better choices. All at lower cost, due to cutting like 40%-50% of the choices.
Permanent high prices but transitory inflation.
Powell is beginning to sound like a Trump press secretary.
SPOT ON!
The US is fragile. To reduce risk Trump transferred responsibilities to the states
(federalism) and to the European. He is fully committed to cutting gov debt and to bring industries back. Import will fall. Highly skilled and skilled wages will rise, tariffs might increase certain prices, but the cost of a house and rent will fall. The rich will park their money in industries instead of RE : rotation from investing in RE to industries.
Wall street didn’t accumulate enough. They are paying CSPAN to send the markets a little lower, bc the red vol was still too high.
Trump’s tariffs are just beginning. Within a few months they will be causing issues in the US supply chain; increasing costs and decreasing output. The resulting stagflation will increase the chances of a recession.
I feel badly for US manufacturers.
Why would you feel bad for them, if they move production to the USA?
That’s one of the big goals of tariffs, right?
As for supply chain disruptions, I don’t see how that’s going to develop except maybe with bigger ticket items.
Who cares if someone has to pay 25% more for a Ford coming in from CA or MX. It’s already overpriced anyway, and there usually are either American made alternatives or used models.
I was unaware that one of the goals of tariffs was to make US manufacturers less competitive.
US manufacturers compete in a global market. If tariffs on their inputs make their costs go up, they become less competitive globally. Higher costs mean they can’t sell into the global market, and they are then left with only the US market. And the only reason they can compete in the US market is because of high tariffs on their competitors products.
The result is domestic prices go up, for both imported and locally manufactured products. You may not care if truck prices go up 25%, but most truck buyers care. And higher prices will mean fewer domestic sales in addition to far fewer international sales.
It’s a recipe for a shrinking US manufacturing sector.
Instead of making predictions I am going to just wait and see. I don’t own any Canadian stocks but I might be interested in some companies in Alberta just in case. Do you have any recommendations? This is a serious query by the way. You know the field.
“It’s a recipe for a shrinking US manufacturing sector.”
Or its a recipe for stimulating domestic production. Steel / Aluminum production are two good examples of what needs to be produced more here in the US.
I agree with Doug78. Time will tell so let’s wait & see what happens. By this fall should start to give us a decent idea how all of this may or may not play out.
Rumors have it the White House is pushing hard to ban all foreign students at Universities. This will leave lasting damage that will be difficult to undo because the educational system in the U.S. is terrible.
Rumor has it Joe Biden is trying to get back in the game.
Good luck with that!
That is not a rumor. It is fact but he has forgotten where he put his telephone.
What is wrong with you? Trump is a convicted felon known for lying to the American people, daily. But you are good with that?! You either are a bully or were bullied a lot when you were young.
Again, the truth hurts and your only argument is the left made him a criminal. You guys are funny… I must say.
,
For all the clowns and idiots that keep saying DOGE and Trump is saving a ton of money, the Trump admin is already on track to surpass spending under Biden. Yup, read ’em and weep.
https://www.marketwatch.com/story/despite-musks-claims-the-trump-administrations-spending-is-on-pace-to-surpass-bidens-levels-19cdf24c
Is this the same Musk whose goal was self-driving cars for a decade and has yet to deliver?
Long time readers of comments here know that I started the catchphrase, “It’s turtles all the way down and inflation all the way up!” a few years ago.
I did it for a reason, endless government spending, demographic death spiral, out of control social programs all come together to create that phrase and there is no way to fix it unless a cataclysmic event happens and if that happens nothing will matter anyway.
It will only get worse with trump’s tariffs and other nonsense but what does it matter, you’re on the Titanic with a new captain that’s throwing ballast overboard, firing the crew, and acting like a fool pretending the ship isn’t sinking because he’s the greatest captain that ever lived.
What you’ll get is The Trumpocolypse™ with captain Trump saying “Look at me, I am the captain now.” We all know how that story ends.
“It’s Trump turtles all the way down, and inflation all the way up!”
Something’s changed! PapaD and MPO getting upvotes? I must be on the wrong website – or the socialists have left the room. I’ll check in later
Socialist are the clowns…you are funny. The entire world is presently looking at the US as a pariah state. Jezus what is wrong with you?
Except for… Russia, North Korea, China ( who is playing us hard), oh well…what’s a country to do?!
The MW article is garbage. Apparently, the writer & your naive thinking forget that Brandon pushed out hundreds of billions of extra dollars from Oct 1, 2024 – Jan 18, 2025.
And everyone knows that spending isn’t really going to go down until we get into FY 2026. 2025 is a transition year from Congress who, again, holds the purse strings.
And, everyone, except you I guess, knows something has to be done about spending or we’re cooked. At least Trump & DOGE are trying and appear to be succeeding in finding a gargantuan amount of waste.
Keep whining like Schumer & all of his Dem pals, but we’ll give you style points for Trumpocolypse. It does make me chuckle. How much do I own you finding using it in my post?
And you forget the debt ceiling was raised $4 trillion by the Trump/GOP budget. But I’ve bookmarked this post and I’ll make you eat your words in 2026. I put a note on my calendar for March 30 2026, is that good enough for you or you want the whole year? It won’t matter either way, I guarantee you’ll be wrong.
No charge for using The Trumpocolypse™, hubris is enough payment for me.
Right, and the debt ceiling is going to get raised again like it has ever since it was put into law. I’m just happy that Trump is trying to cut spending. It’s amazing to me that you’re not celebrating that, in general. The only prediction I’m going to make is that Trump is going to try to cut spending while also trying to pass through some level of tax cuts. What the net result of all that will be is something nobody on Mishtalk knows who it’s going to turn out.
I’m not sure that I’m supposed to eat crow about a year from now other than whether or not you’ll be still whining like Schumer. If I had to be though, I’d say yes: YOU’LL STILL BE WHINING ABOUT TRUMP.
With respect to the government efficiency component of spending, the DOGE team has some reasonable things to say. I do wish Elon would have allowed them to carry the conversation.
Elon Musk and DOGE team give behind the scenes look at their mission
Damn it, Whenever the Fed say temporary anything it always means it a problem they didn’t expect, and don’t know how to fix, so they hope it can be ignored.
One of the few things that’s declining in price is $Melania meme coin.
It’s been bouncing around like a dead cat for the last week but managed to set a record low today.
Down 95% since its introduction.
Opportunity
Anyone who bought it deserves everything they got.
“No one really knows what Trump will do or the ultimate impact of a huge wave of tariffs if he goes ahead.”
No one really knows how much Trump will cut from the deficit.
No one really knows how much tax cuts Trump will push through Congress.
No one really knows what will happen geopolitically.
No one really knows how much money Congress will spend when the recession arrives.
No one really knows much of anything.
Can we agree .. Lincoln he aint.
No we can’t.
I feel so sorry for the younger baby boomers who make up the ranks of MAGA. As the youngest in their families, they were the artists and musicians. They of course didnt make any money. Now they are in their upper 60s, they have no pensions, they didnt invest enough in stocks (401ks are an embarrassment), taking SS at 62 was a few hundred a month income, and now they have to grovel and kiss the butt of this carnival barker who promises to squeeze non-Americans until the MAGAs get their deserved money (someone squeezed the Jews under the same thinking). I feel so sorry for them.
“I feel so sorry for the younger baby boomers who make up the ranks of MAGA. As the youngest in their families, they were the artists and musicians. “
In my family it is metallurgical engineer and power plant operator actually. The younger boomers came of age after the 1973 oil shock. We have always been scrambling to eat and live indoors.
the flower children were before us though still boomers.
The astronauts and engineers were the first born boomers (in general), and started businesses and retired first with the money. Or so I hear.
Another “transitory” option is that Trump’s tariffs may be short-lived or narrowly tailored. My own opinion is that Trump will impose a lot fewer and/or for a short period AND that all the uncertainty he has created is already destined to out the US into a recess ((Which Mich notes might already be deflationary). The only question is how deep of recession and how long.
I dont believe this inflation is like the last. Yes, money supply was an issue in the 1970s and also here post-Covid. But there are other expenses this time around that I dont think people took seriously until now. We didnt save enough for the government pensions that are now having to be paid to cops, firemen and teachers, and no one bothered to save enough for. Increasing property taxes arent included in inflation calcs, but they filter thru to business and household expenses. Also the insurance increases for all the hurricanes and wildfires that damage homes and business. And the increases in food and car part prices etc caused by Covid-killing businesses making there be two suppliers for soda and spark plugs instead of four. The businesses want to reclaim their Covid losses and they know you cant go anywhere else. This is not your father’s inflation. And I seriously doubt higher interest rates will necessarily bring inflation down this time.
Sixty five millions boomers retire and expire every day. They own over 40% of the housing market. Gen alpha, zoomers and millennials might stay on the sideline until the ratio: wages/ [mortgage, insurance, RE taxes, maintenance] will rise significantly. It’s a systemic change. lowering mortgages is not good enough. Since 2008 (Prof Bernanke invention) the Fed raided people bank accounts to save the banks, the housing market and shingle mums. Since 2011 houses appreciated 300%/400%. In the next decades RE prices are likely to depreciate in real terms, until the ratio: Price/Rent drops significantly, until millions houses find buyers, until deflation stops
That’s a lot of wealth that’s been transferred & will be transferred to younger generations. IMHO, this will be a major contributor to ongoing housing inflation.
Do you mean 10,000 not 65 million?
Mish: 77% out of 65 million boomers own a house. They retire and expire every day. In the next two decades 50 million house will enter the housing market. Gen alpha, the zoomers and millennials put American dream on hold. These house might find tenants. The glut will start soon. It will suppress rent and price. Both will deflate for decades in real terms. Highly skilled and skilled workers income will rise during the RE glut.
Mish is correct. Roughly 10,000 boomers retire each day. And roughly 6,500 boomers die each day.
You said 65,000,000 boomers retire and die each day. At that rate there would be no one left in the US after 6 days.
Meanwhile 10,000 babies are born in the US each day. Our population is still growing. Which means we will need more housing as time goes by.
Engel’s English is very poor.
End of life care will eat up their assets at a rate you wouldn’t believe.
And how often has the fed futures market accurately forecast the federal funds rate?
Yes, but now we know so called 3D or 4D chess are not in play. What you see is what you get, at best.
This admin is only capable of playing Chutes and Ladders and that’s with an adult in the room. Great fun for ages 3+
Why don’t you own a car? The only place in the US where you can do without a car are only three or four city centers. Do you live in Europe?
It’s not chess. It’s high stakes poker. In chess everyone can see the board. In poker the cards are hidden so you have to calculate probabilities on little information. Trump is playing poker.
Mostly peaceful inflation.
Transitory is a term best used in hindsight.
Unfortunately, Paul Volcker was the last “true” fed chair whose actions were not dictated by politics.
That’s the only positive thing you could say about Volcker. Pritchard flew to D.C. in 1980 to talk with Volcker and Bob Dole about policy. He came back livid and for good reason.
I was coming out of school when Volcker’s recession hit. It was worth it. But nobody in sight is Paul Volcker.
Unfortunately you are Very correct. Perhaps Sir Paul could resurrect
Volcker’s actions cured the recession whose roots were tied to his predecessor’s liberal monetary policy.
The 60 year interest cycle peaked and was ready to reverse without Volker’s intervention.
No, the DIDMCA of March 31st, 1980, cured the recession. It drastically reduced the velocity of circulation which caused the 30 + year bull market in bonds.
Economists don’t know a debit from a credit. The deceleration in velocity was predicted in May 1980 by Dr. Leland James Pritchard, Ph.D., Economics Chicago 1933, M.S. Statistics, Syracuse, Phi Beta Kappa:
“The Depository Institutions Monetary Control Act will have a pronounced effect in reducing money velocity”. Everybody else was clueless.
“Among the purposes of the act were ‘to provide for the gradual elimination of all limitations on the rates of interest which are payable on deposits and accounts, and to authorize interest-bearing transaction accounts.’ ”
Go figure. Banks don’t lend deposits. And all monetary savings originate within the commercial banking system.
Elon Musk as the Fed President would be.
Volcker’s reign is a myth. History has been re-written. Paul Volcker’s version of monetarism (along with credit controls: The Emergency Credit Controls program of March 14, 1980), was limited to Feb, Mar, and Apr of 1980. Even with the intro of the DIDMCA of March 31st 1980 (making reserve requirements compulsory for all nonmember banks, which held 35 percent of all the payment system’s transactions deposits), total legal reserves increased at a 17% annual rate of change (before FRB-STL’s Dr. Richard Anderson’s “reconstruction”), and M1a exploded at a 20% annual rate (until 1980 years’-end).
Why did Volcker fail? This was due to Volcker’s operating procedure. Volcker targeted non-borrowed reserves (@$18.174b 4/1/1980) when at times over 200 percent of total reserves (@$44.88b) were borrowed (i.e., absolutely no change from what Paul Meek, FRB-NY assistant V.P. of OMOs and Treasury issues, described in his 3rd edition of “Open Market Operations” published in 1974).
One dollar of borrowed reserves provides the same legal-economic base for the expansion of money as one dollar of non-borrowed reserves. The fact that advances had to be repaid in 15 days was immaterial. A new advance could be obtained, or the borrowing bank replaced by other borrowing banks.
It was before the discount rate was made a penalty rate in Jan 2003 (Bagehot’s’ dictum). And the Fed funds “bracket racket” was simply widened, not eliminated. Monetarism actually has never been tried.
Then came the “time bomb” (as predicted), the widespread introduction of ATS, NOW, & SuperNow accounts at 1980 year end — which vastly accelerated the transactions velocity of money (all the demand drafts drawn on these accounts cleared thru demand deposits (DDs) – except those drawn on Mutual Savings Banks, interbank, and the U.S. government).This propelled N-gNp to 19.2% in the 1st qtr 1981, the FFR to 22%, & AAA Corporates to 15.49%. My prediction was 15.48%.
Inflation wasn’t stopped until Volcker imposed reserve requirements on NOW accounts in April 1981. By the first qtr. of 1981, the damage had already been done. But Volcker errored again (supplied an excessive volume of legal reserves to the banking system), in late 1982-83. I forecast in FEB 84 that stocks and bonds would bottom in June 84. Stocks bottomed June 15 @1086.90 & bonds on July 2 @13.76%
Oh no. I’m feeling sudden-onset PTSD. Will this set up JP as DJT’s scapegoat when all this goes off the tracks?
Only a few redhat dimwits will buy such an explanation.