Bloomberg Businessweek – Instant Reaction: Jay Powell on the Fed Decision

Date: March 18, 2026
Hosts: Carol Massar, Tim Stenovec
Notable Guests/Analysts in this Episode: John, Steve, Ed Ludlow, Torsten Slok (Apollo), Mike McKay (Bloomberg), Jeff Rosenberg (BlackRock)

Episode Overview

This special breaking news episode delivers immediate analysis and market reaction to the latest Federal Reserve policy decision and Chair Jay Powell’s subsequent press conference. While the Fed kept rates unchanged, Jay Powell’s candid comments about his potential succession and the ongoing DOJ investigation created ripples across financial markets. The discussion dissects rising uncertainty due to geopolitical shocks—particularly turmoil in the Middle East—and their impact on energy prices, inflation, and Fed policy credibility.

Key Discussion Points and Insights

1. Jay Powell’s Succession & Continuity at the Fed

• Powell’s Commitment to Stay: Amid a backdrop of DOJ probes and political uncertainty, Powell clarified he will serve as Chair "pro tem" if his successor is not confirmed by term’s end.
  • Quote: “If my successor is not confirmed by the end of my term as chair, I would serve as chair pro tem until he is confirmed. I have no intention of leaving the board until the investigation is well and truly over…” – Jay Powell via Mike McKay [02:27]
  • Powell has not decided whether to remain on the Board as governor after investigation ends.
• Legal and Political Implications: Analysts warn that Powell’s approach—staying on as chair pro tem—could trigger legal wrangling over Fed governance.
  • Mike McKay: “We could be looking at another big legal fight down the road if they don’t get Kevin Warsh in there by May 15th.” [12:04]
• Historical Parallel: Steve draws a line from this moment to Mariner Eccles in 1948, last to stay on after term ended due to concerns over geopolitical and economic disruption. [17:10]

2. Geopolitical Shock: Middle East Turmoil and Energy Prices

• Immediate Market Impact:
  • Equity markets turned lower (S&P 500 down 1%), yields rose, especially at the front end of the curve when Powell addressed his future.
  • “Twos, tens and thirties yields higher, particularly at the front end of the yield curve… Up by 7 basis points on a 2 year.” – John [01:39]
• Uncertainty Dominates:
  • Powell downplayed forecasts, emphasizing humility amid unexpected shocks—especially the attacks on Iranian energy assets and closure of the Strait of Hormuz.
  • “It is too soon to know the full economic effects from the Middle East…” – summarized by Steve [04:04]
• Oil Market Tension:
  • Torsten Slok: The Middle East shock is not being fully acknowledged by the Fed in policy response. “They decided to just basically completely ignore the Middle Eastern shock that we’re facing here.” [08:34]
  • Huge spreads between physical and paper oil suggest possible market complacency—a risk as supply constraints bite harder.

3. Fed Policy, Dissent, and Market Communication

• Unanimity and Dissent:
  • Only one dissent (Governor Myron) favoring a cut—unexpected, as Waller was seen as possible dove after latest weak jobs report.
  • “[Waller] sat around this table only a week, two weeks ago and said it depends on the next jobs report… and then he did it.” – John [06:29]
• Hawkish Turn:
  • Jeff Rosenberg: “The pivot was… really his answer to the question about employment. He definitively said no to that and then pivoted to the challenge on inflation… that was the point at which the meeting turned hawkish.” [20:41]
  • The median “dot” still implies one rate cut this year, but market pricing has now pushed the expected first cut back as far as July 2027. [22:04]
• Balancing Risks:
  • Recall of 2022’s inflation surge and the need for caution: “They are facing off with a series of shocks with the backward view of what happened in the post pandemic era where you had inflation that creeped up to 9%.” – Steve [05:49]
  • Powell is seen as avoiding the word “transitory” but repeatedly stresses uncertainty and “too soon to tell.”

4. Broader Credibility and Independence Concerns

• Fed Credibility at Stake?
  • Market-based inflation expectations remain anchored; foreign ownership of US Treasuries at highs suggests international confidence is intact.
  • “Look at inflation expectations… Market based inflation expectations have remained really well anchored throughout all of this.” – John [17:51]
• Political Backdrop:
  • President Trump’s public pressure for rate cuts injects more volatility into the debate about Fed independence and succession [04:04].
  • Debate: Does Powell’s stance create steadiness or stir more controversy at a sensitive time for Fed independence?

5. Economic Forecasts and Oil Shock Implications

• Model Limitations:
  • Slok and Rosenberg highlighted that traditional Fed/ACP models may seriously underestimate the potential duration and impact of the shock.
  • If current shocks persist into “months not weeks,” GDP could be materially affected.
  • “The textbook would certainly tell you that an oil price shock is stagflation. You get higher prices and lower GDP. And there was no evidence of that in the [Fed’s] ACP today.” – Torsten Slok [25:42]
• Demand Destruction Concern:
  • Rosenberg emphasizes that if the oil price shock continues, the story could shift from focusing on inflation to a real hit to growth:
    • “It’s not how high do oil prices go before you hike, but how high and for how long do oil prices get before you cut?” [23:38]
  • Anecdotal and real-time data on driving, airfare, and gasoline consumption will be crucial for tracking evolving effects.

Notable Quotes & Memorable Moments

• Powell’s Duration as Chair:

  • “I would serve as chair pro tem until he is confirmed. I have no intention of leaving the board until the investigation is well and truly over…” – Jay Powell [02:27]

• Market Skepticism and Humor:

  • “If you want to make a fool of someone on Wall Street, ask for a crude forecast.” – John [08:19]

• Hawkish Pivot Identified:

  • “That was the, the point at which the meeting turned hawkish. The majority of the discussion… is around inflation… and disappointing the expectations for inflation to decline in the backdrop of stable unemployment rates.” – Jeff Rosenberg [20:41]

• Historical Echoes:

  • “The last person to stay on… as Fed chair after his term was Mariner Eccles. This was in 1948… It is interesting that we’re dealing with the same discussions…” – Steve [17:10]

• Demand Destruction Lens:

  • “It’s a GDP story of constructing GDP under massive price stress.” – Ed Ludlow [24:19]

• Caution on Forecasts:

  • “If you look at page 16 of the ACP, it talks about the uncertainty in the forecast. The uncertainty in these forecasts is greater than the mean.” – Jeff Rosenberg [26:13]

Key Timestamps Overview

• Powell’s Succession Comments & DOJ Investigation: [02:27]
• Markets React to Powell's Forward Guidance: [03:38]
• Debate on Fed Doves, Hawks, and Middle East Shock: [04:42] – [09:14]
• Torsten Slok on Shock Duration and Policy Risk: [08:34], [11:27]
• Mike McKay on Legal Uncertainty of Pro Tem Status: [12:04] – [13:31]
• Debate on Fed Credibility and Independence: [15:02] – [19:56]
• Rosenberg—Pivot to Hawkish Stance on Inflation: [20:41]
• Markets Price Out Near-Term Rate Cuts: [22:04]
• Demand Destruction and Oil Shock Scenarios: [23:08] – [26:13]

Conclusion

This episode captured a rare moment of uncertainty and candor at the Federal Reserve. Markets are grappling with the dual uncertainties of Fed succession and geopolitical shocks, complicating forecasts for inflation, growth, and interest rate policy. Jay Powell’s unusual public clarity about his intentions—set against a backdrop of political pressure and legal questions—underscores the Fed’s current balancing act. Meanwhile, oil and energy price shocks add complexity to an outlook already challenged by evolving risks and the limits of standard economic modeling. Through lively debate, historical context, and sharp questioning, the hosts and guests illuminate why both the market and policy paths forward are as uncertain as they’ve been in years.