Powell Will Vote With His Mind and Heart, Daco Says

Summary

Gregory Daco discusses the U.S. economy's surface strength but underlying fragility, warning of layered supply shocks that could lead to inflation persistence. He argues the Fed should consider tightening policy, and notes the possibility of FOMC dissent from Chair Warsh versus Governor Powell's focus on institutional credibility.

• Economy is strong on surface but fragile in growth
• Layered supply shocks risk more inflation persistence
• Monetary policy may be easier than it appears in short run
• Fed should consider tightening or signaling tightening
• Chair Warsh may dissent due to support for easy policy and AI productivity
• Powell will vote based on inflation and employment mandate
• Clear divide between regional Fed policymakers and Warsh's views