From Fortune:

Federal Reserve Chairman Jerome Powell has avoided announcing interest rate cuts in recent months despite a steady drop in U.S. inflation, and Steve Eisman, a senior portfolio manager at Neuberger Berman, has a theory about why. The veteran investor believes that Powell has learned from the history of Fed Chair Paul Volcker, and wishes to avoid sparking a recession in the process.

Volcker’s success in combating the rampant 1970s inflation by raising interest rates at an unprecedented rate in the early 80s paved the way for the eventual recovery. Volcker succeeded where his predecessor had failed, but it took multiple rounds of rate hikes and a short but severe recession for him to truly defeat inflation.

Eisman believes Fed Chair Powell is hoping to follow Volcker’s footsteps, hoping to avoid sparking a serious recession in the process. Instead of cutting interest rates right away, Powell is attempting to slowly lower rates over time to avoid the type of prolonged economic disruption seen in the 70s and early 80s. With inflation fading and the economy proving it can withstand the current level of interest rates, Powell’s best option might be to simply do nothing.

Eisman argued that the Fed can already “declare victory” over inflation, that unlike Volcker, who was forced to choose between inflation or a recession in the early 1980s, Powell has the luxury of simply waiting to see how the economic data looks in coming months before altering policy. Eisman’s remarks contrast with earlier analysis of Powell’s tenure, with many financial observers claiming that the Fed chair was trying for the exact opposite: To draw comparisons to Volcker and avoid any with Burns.



Read more: Why is Jerome Powell being vague on rate cuts? He’s ‘petrified’ of repeating Paul Volcker’s shock, Steve Eisman says