JP Morgan Economist Says Powell Hasn't Shown Lot Of Faith In Forecasts: 'He Needs…Actual Evidence That The Economy Is Slowing'

JPMorgan Chief U.S. Economist Michael Feroli reportedly said that Federal Reserve Chair Jerome Powell doesn't seem to believe in forecasts and may be looking for real indicators that the economy is slowing.

What Happened: "He has shown not a lot of faith in forecasts. I think he needs to see actual evidence that the economy is slowing before he really confidently takes a pause here. Between the May meeting and the June meeting, you have two more payroll reports. If those don’t show some slowing from where we were in March, I think we might be in store for another hike," Feroli told Bloomberg TV.

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Fed meeting minutes from the March policy showed members expected the recent banking crisis to tip the economy into a mild recession later this year. Participants also observed that inflation remained much too high and that the labor market remained tight. "…as a result, they anticipated that some additional policy firming may be appropriate to attain a sufficiently restrictive policy stance to return inflation to 2 percent over time," the minutes said.

Inflation: On Wednesday, data showed that U.S. inflation rate slowed more than expected to 5% year-on-year in March, marking the lowest print since May 2021.

On the possibility of inflation staying higher than expected at a time when the economy possibly tips into recession later this year, Feroli noted that it would be a dilemma but said the central bank may not cut rates quickly in that situation.

"Over the past few decades, we haven’t seen inflation like we have now. So, I think that may be why they have emphasized that they are going to keep rates high for a long time. The first sign of economic weakness, (they) might not be as quick to cut rates as we grew up expecting them to," Feroli said.

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