In politics, the "atmosphere" is crucial. It was what caused Biden's successor Harris to lose the election, and it also helped Trump oust the Democrats.

But as the term "vibecession" suggests, Consumer behavior can involve spending generously while complaining about prices and employment. Federal Reserve Chairman Powell's remarks this week indicate that the political lesson from the "vibecession" is not to shove economic data at people expecting them to change their views, but rather to acknowledge public perceptions (even if agreeing with them) while waiting for more objective Indicators to tell a more complete story.

Powell seems to be saying, "Your complaints are valid," but in the new context of an economic slowdown and tariffs causing inflation, fears of the unknown are inducing panic, and these complaints may also distract from the issue.

Earlier this week at a Federal Reserve press conference, Powell stated, "The relationship between survey data and actual economic activity is not very tight. People often say the economy is terrible, yet they go out and buy a new car. But we do not know if this will happen again."

Powell assured the markets that even while acknowledging that anxiety may be a reasonable reaction, the economic situation remains solid. Furthermore, given the lagging nature of data, this sentiment could evolve into something worse at any moment.

Central banks do pay attention to soft data, such as Consumer confidence surveys and business testimonies, and they monitor them closely, but their role is a yellow light, not a red light.

Powell said, "We are clearly aware that sentiment data is softening, and there is a high level of uncertainty." After all, inflation expectations can be self-fulfilling. Convincing Americans that prices will remain stable is a core mission of the Federal Reserve. Managing the "atmosphere" is Powell's job.

The Federal Reserve is currently mainly waiting for signs of weakness to shift from surveys to hard data such as prices and employment. Powell emphasized that the Federal Reserve has the ability to wait.

While pessimistic surveys and Wall Street comments bring the possibility of a new round of price increases and economic growth deterioration into people's view, the unemployment rate in the USA remains very low. Even if the Federal Reserve itself lowers GDP expectations, the unemployment rate is still expected to stay low.

If April arrives with price pressures and unemployment following, the Federal Reserve will be able to intervene. Otherwise, Powell and his colleagues may act too hastily. While investors can Buy or Sell at any time, the Federal Reserve and its blunt tools are as flexible as a huge oil tanker. Changing direction requires a firmer belief in the direction of the economy.

Anticipating worse outcomes is not itself an ominous sign. Therefore, in the face of deteriorating sentiment, the Federal Reserve chooses to maintain restraint.

Editor/rice