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Powell’s second term underlines Biden’s quandary

Markets gave tepid applause to US President Joe Biden’s decision Monday to designate Jerome Powell for a second term as Federal Reserve Chairman. The broad market rose slightly while the tech-heavy NASDAQ Index fell in tandem with bond prices.

Tech stocks have traded in lockstep with “real” (that is, inflation-indexed) interest rates for the past year and a half, as investors treat the tech giants like utilities with stable long-term cash flows.

Powell might have been a punching bag for Republicans, who are making political hay out of the highest inflation in 40 years and the resulting fall in real wages. Throughout 2021 Powell insisted that inflation was “temporary” or “transitory,” forecasting a gain this year in the Consumer Price Index of just 2.4% as late as last April.