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Chicago Fed President Charles Evans Resorts to Hope, Does Not Foresee a Recession

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24 comments on Chicago Fed President Charles Evans Resorts to Hope, Does Not Foresee a Recession

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Synopsis 

ForexLive has a nice synopsis Fed’s Evans: High prices will persist longer than I thought

  • High prices will persist longer than I thought
  • However high prices are not persistent
  • The Fed has to reposition itself in response
  • By the end of the year will know a lot more about how persistent inflation is
  • Hopefully inflation will be receding
  • Supply pressures are more intense than expected
  • At the end of the year will be able to make choices about more or less restrictiveness
  • We need to position monetary policy much closer to neutral.
  • The US economy has momentum
  • neutral setting for monetary policy is 2.25% to 2.50%
  • Had tough would be at neutral by March 2023; If got there by December, that would be ok too
  • Not going too far, to quickly is important for optionality
  • 50BP hike is worthy of consideration, possibly highly likely
  • The real discussion is how are you want rates to be positioned by the end of the year
  • I don’t at the moment expect to see the need for restrictive policy to reign in inflation, but there is a risk

Remarks 

https://twitter.com/PriapusIQ/status/1513563875551162376

I caught the tail end of the the event. Evans was asked about a recession. Of course he does not foresee one. 

The Fed never spots a recession in advance and former Fed chair Ben Bernanke could not even see one that had already started.

Hope Based Fed 

Neutral Policy 

Too Early to Tell Mission Has Failed

Need More Time 

Time Not On Fed’s Side

That last Tweet fits into my thoughts perfectly.

The Fed will take so much time it will never get to what it perceives as neutral. The economy will be in a severe recession well before the Fed gets to 2.25%.

In my estimation the economy is cooling far faster than anyone realizes and a global recession is a given. 

This post originated at MishTalk.Com.

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24 Comments
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amigator
amigator
3 years ago
There will not be a recession as we know it. We have broken through the worries of the money printers. So, at the start of the next so called recession there will be some ominous event that will require 20 plus trillion stimulus….
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Casual_Observer2020
Casual_Observer2020
3 years ago
Reply to  amigator
My prediction is covid makes a comeback by 2025. There will be more impetus for spending for Ukraine and Europe against Russia until then. A few more countries are set to join NATO this summer. There is literally no way massive weapons won’t be deployed to eastern Europe and new NATO countries this summer. The West and Russia have now started down the game of brinksmanship which has no good options. The longer this goes on the more likely we get missiles flying into a NATO country.
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Dr_Novaxx
Dr_Novaxx
3 years ago
Yes, and the CPI doesn’t even measure *real* inflation anymore. They replaced apartment rent with “owners’ equivalent rent” fairly recently. This is obtained by polling homeowners with a question like “what price would you charge to rent out your home?”
I dare say If we used the 1970s calculated CPI, the rate today it would probably be double the current advertised rate. This is yet another form of fraud so prevalent today — using the same term to describe something completely different than the original meaning. Like calling genetic modification injections a “vaccine.” This is always done to obscure reality and thus hide criminal intent.
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ColoradoAccountant
ColoradoAccountant
3 years ago
Mortgage rates over 5 percent today. Won’t the Fed loose money if they sell their MBS’s? I thought they weren’t allowed to sell at a loss.
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goldguy
goldguy
3 years ago
Evans would be lousy stock market picker, hope never works
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Zardoz
Zardoz
3 years ago
TYPING IN ALL CAPS MAKES ME QUESTION HIS COMPETENCE
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Felix_Mish
Felix_Mish
3 years ago
For a bit of a kick, watch the Not The Bee elder abuse video currently playing – a hit piece on Biden and those using him – then read this Mish posting.
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Counter
Counter
3 years ago
Is he insinuating that asset bubbles are inherently deflationary?
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thimk
thimk
3 years ago
Yup the feds still think inflation is transitory and in denial that this type of structural inflation cannot be remedied via the feds “toolbox” .
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Scooot
Scooot
3 years ago
The end of the year is 8.5 months away, he’s effectively said by then well know what happened. That hardly inspires much confidence in their handling of the situation. I guess they just don’t know what to do.
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Casual_Observer2020
Casual_Observer2020
3 years ago
Reply to  Scooot
They don’t know in part because they are flying blind when it comes to what happens with Ukraine and Russia. It is now literally week to week. We are entering phase 2 now which has the risk of escalating into a wider war. The longer this goes on the more likely more stimulus will be needed to keep funding the war. Make no mistake the US is the chief spender in this war against Russia.
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BowserB46
BowserB46
3 years ago
Reply to  Casual_Observer2020
Thank you, Casual Observer. Your comment is one I rarely hear, even though it should be obvious to everyone. U.S. weapons by the hundreds of thousands sent to Ukraine. Are we not allowed to ask who’s paying for them? Not Ukraine, as their still paying Hunter Biden. NATO? Yeah, that’ll be the day. No it’s us “printing more money” and then being surprised when we have inflation. Seems to me the only “hope” that’s left is that Russia sends a nuke to D.C.
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RonJ
RonJ
3 years ago
“Chicago Fed President Charles Evans Resorts to Hope”
Maybe he should cross his fingers, as well.
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Zardoz
Zardoz
3 years ago
Reply to  RonJ
Maybe some thoughts and prayers will do the trick.
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Scooot
Scooot
3 years ago
Will a recession make much difference to the cost of living this time? The bond market doesn’t think so, the long end has taken another hammering today.
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Tony Bennett
Tony Bennett
3 years ago
Reply to  Scooot
Until equities relent, or something “breaks”, the trend will be for higher rates.
Both coming.
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Scooot
Scooot
3 years ago
Reply to  Tony Bennett
Yeah I agree.
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Casual_Observer2020
Casual_Observer2020
3 years ago
Is it the Fed’s job to prevent recessions ? This is where they went wrong in their mission. I say set rates back to 2.25% since that is neutral. There are great reasons not to ever change rates again after that because neutral is neutral.
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BowserB46
BowserB46
3 years ago
Reply to  Casual_Observer2020
The Fed has never prevented anything–except the stock market from being a real free market for the last twenty years. Apparently they believe the 1970’s were an anomaly and not an unavoidable outcome of excess government spending.
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Tony Bennett
Tony Bennett
3 years ago
Evans? … hardly a Nostradamus …
May 2021:
“It seems to me that such an accelerationist view is on the minds of many of those warning about an outbreak of inflation today. I think the risk of this scenario is remote.
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…. So there is no evidence that inflation expectations are spiraling out of control.

Indeed, I have to say that I hope we do get some feedback between actual inflation and inflation expectations as we move through the year. If expectations move up, then we could make some real progress toward reaching our inflation target.”

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Tony Bennett
Tony Bennett
3 years ago
“The US economy has momentum”
…
Sure …. umm, which direction?
Another brutal reset in mortgage rates today. Avg 30yr back to highs not seen since 2009.
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thimk
thimk
3 years ago
Reply to  Tony Bennett
That escalated quickly . the feds haven’t touched MBS securities , they’re still in the jawbone stage
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Zardoz
Zardoz
3 years ago
Reply to  thimk
Makes me understand why they don’t say ‘recession’… if they say it 3 times, one will surely appear, like Beetlejuice.
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BowserB46
BowserB46
3 years ago
Reply to  Zardoz
I think it’s amazing how the Fed seems to learn the same lesson again and again, and never remembers that lesson for more than a few minutes.
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