Whatever Jerome Powell said, Wall Street heard ‘rate hike’

Jerry Powell apparently doesn’t get it.

The new head of the Federal Reserve isn’t supposed to imply that he doesn’t work for Wall Street. And he’s not supposed to say, as he did the other day in front of Congress, that “we don’t manage the stock market — we manage stable prices and maximum employment.”

That’s not what Wall Street and the stock market want to hear. And that was proven by the fact that the stock market dropped sharply on Tuesday when Powell was speaking.

And Powell’s comments were one of the reasons Wall Street’s pros couldn’t get a good rally going on Wednesday, even though it was the time of month when the market is usually manipulated higher so professional money managers can brag about their performance.

The Dow Jones industrial average closed Wednesday down 380 points, to 25,029.

Investors are undoubtedly worried that Powell will be more like Paul Volcker, who left as head of the Fed in 1987 after conquering out-of-control inflation.

Wall Street would like him to be more like more-recent ex-Fed bosses Alan Greenspan, Ben Bernanke and Janet Yellen — who wanted to be tight with politicians and loved by the investment community.

Volcker had it right, but you won’t fully understand that until there is another case of inflation that starts eating into the buying power of all that money you’ve saved over the course of your life.

But don’t worry. Powell will probably come around. The pressure to be loved by the rich and powerful is just too hard to ignore.

Powell, of course, said a lot of other things during his hours-long testimony on Tuesday. The one thing that got the most attention was his assessment of the economy.

It’s improving, he said. And this led to thoughts that this year there might be four rate hikes (as I already suggested) instead of just three.

“We’ve seen continuing strength in the labor market,” Powell told lawmakers. “We’ve seen some data that will, in my case, add some confidence to my view that inflation is moving up to target.”

Uh-oh, inflation “is moving up to target” means that the Fed will be more vigilant and will be raising rates quicker. That, at least, is what Powell believed on Tuesday.

My guess is that view will change. And that’s one of the reasons Powell will end up having to give Wall Street what it wants — soothing words about interest rates — before too long.

Why do I think that? Because despite the fact that interest rates are still extremely low and the fact that Santa Trump just gave everyone a tax break, the economy isn’t more lively than it had been last year.

Take for instance, the Atlanta Federal Reserve’s estimate of first-quarter economic growth. With one more month left in the quarter, the Atlanta Fed says the economy is growing at just a 2.6 percent annual rate — after being at 5 percent a month ago.

And — this just in — durable goods orders were lousy in January, while pending home sales fell 4.7 percent in the month as higher mortgage interest rates caused buyers to have second thoughts.

It’s too early to say the tax cuts aren’t having the desired effect on the economy, but here’s the thing: Those tax cuts on top of low interest rates are causing the Fed to react by threatening to raise borrowing costs faster than expected.

So as welcome as those cuts are to most people, their effect will be lessened by the higher cost of borrowing money.

Next up: the February employment report on March 9. If it’s too strong, the stock and bond markets could flip out. Too weak and people will start to question President Trump’s stewardship of the economy.