The current macroeconomic environment presents contradictory data, such as strong spending despite weak job growth. This ambiguity means the Fed cannot rely on a single indicator. A new chair's primary challenge is to interpret these mixed signals and build a coherent narrative to guide the committee's judgment.
Whether an interest rate is considered 'high' is subjective and often based on recent personal experience, not long-term history. A mortgage rate that seems high today was low compared to the 8.5% rates of 2000. This 'eye of the beholder' phenomenon creates communication challenges for the Fed when justifying its policy stance.
A new Fed Chair cannot unilaterally shift monetary policy by large margins (e.g., 1-2 percentage points). Policy is made by the Federal Open Market Committee (FOMC), where the chair must build consensus. History shows that dissents are not uncommon, limiting a chair's ability to enact radical changes.
The Fed's concern isn't just the current high inflation rate, but the risk that prolonged high inflation changes public psychology. If businesses and consumers begin to expect continued price hikes, they may become less price-sensitive, creating a self-reinforcing 'snowball' effect that makes inflation much harder to control.