In Fed Chief Jerome Powell’s recent testimony to Congress we heard several congressmen shower him with praise for his work.

Really?

It’s the Fed’s job to control inflation. How is that working out? At no time did he say “Boy, we were wrong about transitory inflation, wrong to keep interest rates at zero for years, and wrong to buy so many bonds and mortgages.” Not a word. But we’re to believe he’ll be right on all fronts now? Not so fast.

Now we’re to believe that Jerome Powell is an inflation fighter who much like Paul Volcker 42 years ago is determined to slay that evil whatever it takes. He says that inflation is “too high” and that may soon require some bigger boosts in rates, say by 50 basis points each, not 25. And by the way, he added, it may take three years, not two, for inflation to fall to the Fed’s 2% level. What? Most in the media missed that bombshell. Three more years of uncomfortably high inflation is no small matter.

To his credit Powell did say what the economy will look like a year or two out is far from certain. That’s an understatement. No one knows for sure how far rates must rise and how soon to beat inflation back to at most 2%.

No one, not even at the Fed, knows the impact the war in Ukraine will have this year on U.S. and global growth. The Fed doesn’t know and given their record we shouldn’t have much confidence in their forecast anyway. The seemingly extreme interest rate forecasts and their planned balance sheet liquidations underscore just how wrong the Fed has been to get us to this point.

Stock investors have a lot on their plate. What price in terms of the P-E ratio should they pay for growth? There is no one right answer to that other than “it depends.” There will be conditions ahead — some foreseen, some not — that will power earnings growth and stock prices. For the past 10 years expanding price-earnings ratios have accounted for half the market’s rise. That was then. Earnings growth must be the driver now.

I’ve gotten this far without mentioning the “R” word, as in recession. As a rule recessions only occur when the Fed wants one to fight inflation or an overheating economy. They raise rates. Recent recessions have also been preceded by spiking energy prices. They are spiking now. Will two or now three years of rising rates bring on a recession? Maybe. Maybe not. There are too many variables to know. Let’s see.

David Vomund is an Incline Village-based Independent Investment Advisor. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article.Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.