"Hawkish Powell"? Not a Chance.

Powell “retiring” the word “transitory” to describe inflation by no means implies he thinks it’s not actually transitory. It was performative politics in which Powell, facing Senate confirmation, had to cater to Senators’ obsession with inflation. Retiring the word was a response to a silly question revealing its ambiguity, giving Powell a chance to clear up misunderstandings. He clarified it means inflation won’t “leave a mark,” which we understand to mean won’t perturb long-term inflation expectations, which remain entirely quiescent. Accelerating the tapering of asset purchases is a free option for Powell. It gives him a way to be seen as doing something about inflation, but acceleration will have no economic consequences whatsoever. He can use it to avoid the destructive consequences of having to bring lift-off from near-zero policy rates forward in time before the goal of inclusive maximum employment is met.