Jerome Powell gives the impression that he is a cautious, serious man. There’s no reason to think that that’s an inaccurate impression, that he would be prone to frivolity outside of his job as the Federal Reserve chair. And as a former Wall Street banker who’s now in the most consequential job in high finance, you certainly never get the sense that he’s kidding. So it’s a little jarring to see that on Thursday, the gray-haired Powell was made the butt of a joke by two Russian pranksters crudely posing as Ukrainian president Volodymyr Zelenskyy. This happened back in January, but Powell apparently thought this call was a private one with the world leader and talked candidly about how a recession was just as likely as it was not, and it is now making the rounds on Russian media and Twitter. And Wall Street is having a weird morning digesting it.
The video is strange. The pranksters are, after all, part of a Russian prank-call show whose past victims include European Central Bank president Christine Lagarde and former German chancellor Angela Merkel. The prank callers here aren’t really in the juvenile mold of Crank Yankers, nor do they delve into the kind of cringe that Sacha Baron Cohen perfected with Borat and Da Ali G Show. They ask kind of plausible, serious-sounding questions in broken English, and — crucially — they don’t press on contradictions or absurdities that could embarrass the central banker. Powell doesn’t really seem all that disturbed by the whole thing, but the video is obviously edited with weird jump cuts and some repetitions. (A spokeswoman for the central bank confirmed that Powell had the conversation but said she “cannot confirm it is accurate” and declined to answer more detailed questions about what he did or didn’t say.) And considering that the video is about three minutes long, it seems like they didn’t really get a whole lot of good material.
There is some confusion about how serious a breach it all is. It’s remarkable to hear the head of the world’s most powerful central bank say that a recession is about as likely as not this year, which is a more direct answer than what he tends to give during his periodic press conferences and speeches. Powell goes on to say that he expects the Fed to hike rates two more times by a quarter of a percentage point. The conversation happened at the beginning of the year, and that’s already happened. Some, like the widely followed blog ZeroHedge, missed that context. Powell is also a little more direct than usual when he says that he wasn’t really concerned with unemployment — which was at 3.4 percent that month, the lowest in 53 years — since his major goal is to get inflation back down to 2 percent. “As we walk that path down to 2 percent, we’ll also be considering — not at this point, but a little further on — the effects on the labor market as well,” he said.
Does this matter? Anyone who tracks what the central banker says wouldn’t have found anything he said here very different from what he’s said in the past. The prank callers are reportedly supporters of President Vladimir Putin — an unremarkable fact, given that Russian television these days is an arm of the government — so the supposed gravity of the call is going to be hyped by anyone predisposed to his worldview, even if it’s light on actual revelations. A Fed spokeswoman said “no sensitive or confidential information was discussed” during the talk, and that seems about right. Really, the problem for Powell here is that he’s been struggling to get Wall Street to listen to him and take him seriously, since he’d been wrong about the transient nature of the inflation problem in 2021 and early 2022. (Granted, lots of people were wrong about that, but his voice mattered more.) If he’d been caught saying something contrary to his public statements, or offering a more crude assessment of the world economy or U.S. sanctions, maybe this would be a bigger problem for him. The callers, however, don’t appear to have been smart enough to pull that off.
