Federal Reserve policy is based on trust. The central bank’s ability to maintain stable prices depends on the public’s confidence that it can deliver. But after more than a year of interest rate hikes and attempts to cool the economy, prices are still rising at a pace well above the Fed’s 2% goal and the public is becoming increasingly weary. Market movements have become increasingly disconnected from Fed messaging. Recent data has shown that inflation is still hot, and that the economy is rip-roaring. On Thursday, JPMorgan Chase\n \n (JPM) CEO Jamie Dimon publicly expressed his doubt in the central bank’s ability to control inflation. That’s why Fed officials will be desperately hoping for any sign that their disinflationary policies are working when the January Personal Consumption Expenditures report is published on Friday. The reading, however, is expected to show an acceleration in prices. What’s happening: When people trust the Fed to keep inflation low and stable, they are more likely to hold long-term expectations about prices that align with the central bank’s objectives. This, in turn, can help make it easier for the central bank to achieve its inflation targets. But if the public expects that inflation will be higher in the future, they may demand higher wages while companies may raise prices for goods and services. This, in turn, can create a self-fulfilling prophecy in which inflation expectations become embedded in the economy, making it harder for the Fed to achieve its policy objectives. Dimon eroded some of that trust on Thursday. “I have all the respect for [Fed Chair Jerome] Powell, but the fact is we lost a little bit of control of inflation,” the head of the largest US bank said in an interview with CNBC. Dimon added that he expects that interest rates could “possibly” remain higher for longer, and that it may take the Fed “a while” to return to its goal of 2% inflation. Blackrock analysts wrote in a note Thursday that “we think we are going to be living with inflation. We do see inflation cooling as spending patterns normalize and energy prices relent — but we see it persisting above policy targets in coming years.” “Equity bulls and even Chair Powell have bragged about anchored expectations for inflation and how consumers and investors believe it is moving in the right direction,” said Lisa Shalett, chief investment officer for Morgan Stanley Wealth Management. Recent data, however, raises questions about whether inflation progress is stalling and the Fed will now need to “tread carefully.” Fed officials are highly aware of this problem. At their last policy meeting,”a number” of participants warned that an insufficiently restrictive policy stance could lead to prolonged inflationary pressures where people start to expect inflation to remain high. What to watch: PCE inflation is the Fed’s preferred measure. If that data comes in higher than expected it could increase the likelihood of a larger rate hike of a half percentage point in March. Analysts expect January’s core PCE, which strips away volatile food and energy data, to rise 0.4% from December and by 4.3% year-over-year. A January reading of that magnitude would be a tick higher than December’s, though the annual data would be lower. Layoffs at Wells Fargo, Domino’s tumbles and Carlos Watson is in trouble: What Wall Street is watching today ▸ The real estate slump is hitting big banks as Wells Fargo has let go of more than 500 mortgage bankers this week, according to a Bloomberg report. The layoffs were announced Tuesday and included a few bankers who surpassed $100 million in loan volumes last year, found the report. Wells Fargo confirmed to CNN that the company has had layoffs across its home lending business “in response to significant decreases in mortgage volume in the broader market environment.” A spokesperson for the company said that “we have communicated openly and honestly with impacted employees and provided opportunities for severance, career assistance, and other services to assist them.” Job cuts across the home-lending industry jumped in recent months as the Federal Reserve raised interest rates and cooled the housing market. JPMorgan laid off hundreds of workers in its mortgage unit last month. Morgan Stanley and Goldman Sachs have also cut jobs. ▸ Domino’s stock dipped nearly 12% on Thursday after the pizza maker admitted it was having some delivery issues. “We experienced significant pressure on our US delivery business in 2022,” CEO Russell Weiner wrote in a statement discussing fourth quarter results Thursday. Deliveries at stores open at least a year fell 6.6% compared to the same period last year, CFO Sandeep Reddy said during an analyst call. Inflation is high, the executives explained, and customers just don’t think the delivery fees — which are set by local stores — are worth paying. “As we saw in the last recession, delivery moves with the economy, especially for customers with lower disposable income, who represent a significant portion of our business,” Weiner said. Papa John’s (PZZA), also reported results on Thursday, also delivered soft sales in the fourth quarter. Its stock closed about 6.1% lower. ▸ Carlos Watson, the founder and chief executive of the embattled Ozy Media, was arrested and charged with fraud this week, according to federal court records. Watson was accused in a federal indictment of having “engaged in a scheme to defraud OZY’s investors, potential investors, potential acquirers, lenders and potential lenders.” The charges said that Watson committed the fraud “through material misrepresentations and omissions” about Ozy Media, including the company’s finances, investors, business partners, contracts, and potential acquisitions. 401(k)s are o(k)ay Despite higher prices, endless talk of a possible recession and falling markets, 401(k) participants managed to keep their savings rates relatively steady in the fourth quarter of last year, helping to stabilize their nest eggs and increase their overall average balances, writes my colleague Jeanne Sahadi. That’s according to new data from Fidelity Investments, one of the largest providers of workplace retirement plans, which in total represent $2.8 trillion in assets on its platform. “Fortunately, the data show that retirement savers understand the importance of saving for the long-term, despite market shifts. We are encouraged to see people look past the current volatility and continue to make smart choices for their future,” said Kevin Barry, president of Workplace Investing at Fidelity. By that Barry means the average 401(k) savings rate (including both employee contributions and employer matches) held roughly steady at 13.7%, down from the 13.8% in the third quarter and 13.9% in the second quarter. Apart from its workplace retirement plans, Fidelity reported a 10.2% annual increase in the number of IRAs on its platform, noting that 61% of the IRA contributions made in the fourth quarter of last year went into Roth IRAs.