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Outlook Favorable

New York Fed president John Williams says baseline forecasts are positive despite a mixed picture from trade and geopolitical tensions.

The "Outlook Very Favorable" says Williams.

“Right now, the outlook is actually very favorable,” Williams said during a talk at the University of California, San Diego. He said GDP growth is around 2% rate, with a “very strong” labor market and inflation near a 2% rate.

Curiouser and Curiouser

Williams noted that "economists are notoriously bad at predicting recessions". So how does he know that conditions are favorable?

Nonetheless, things are so favorable that Williams made this curious statement “I think there are definitely a lot of uncertainties and risks out there that we need to be navigating.”

Other Curiously Favorable Statements

  • "The Fed is grappling with the how to model trade uncertainty."
  • “We don’t have as much experience with this".
  • "And sentiment seems to change from one week to another."
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We Have Tools

Not to worry, the Fed has the Tools to Fight a Recession and Can Use Them ‘More Quickly’ Next Time

  • New York Fed President John Williams said he’s confident the central bank has the right tools to fight the next economic downturn.
  • He cited forward guidance and quantitative easing as the Fed has limited room to cut rates.
  • Williams also said worries about the negative consequences from using QE and low rates didn’t materialize.

Curiouser and Curiouser and Curiouser

The Fed has the tools, and will use them quicker.

And Williams is confident about having the right tools, even though he is worried about using them.

The main tool appears to be forward guidance. The Fed will tell us what it will do even though it may have negative consequences.

This all makes perfect sense somewhere down the rabbit hole.

Mike "Mish" Shedlock