Powell Confirms Easy Money Until the Cows Come Home

Mish

Fed Chair Jerome Powell says the economy is far away from central bank’s employment, inflation goals.

Fed to Maintain Easy-Money Policies

Jerome Powell says "It Will Take Some Time" until his personal goals are met although no justification has ever been given for a 2% inflation target. 

“Today we’re still a long way from our goals of maximum employment and inflation averaging 2% over time,” Mr. Powell said Thursday during an interview at The Wall Street Journal Jobs Summit. 

He said he expected it would take “some time” to get there, but repeatedly declined to be more specific about an anticipated time frame.

“I would be concerned by disorderly conditions in markets or a persistent tightening in financial conditions that threatens the achievement of our goals.” And he added that the Fed is looking at “a broad range of financial conditions,” rather than a single measure.

Asked if there is a chance the labor market might reach the Fed’s goal of maximum employment this year, Mr. Powell said, “No, I think that’s highly unlikely.”

When Will We Know?

We will not know until Powell has had enough of the bond market revolt or he sets off a sustained stock market crash. 

A strengthening of the bond market revolt might not even do it. Powell may decide to target the long end of the curve.

Mind Over Market

This is a case of mind over market, or so Powell thinks.

Powell and Powell alone gets to determine when according to his own arbitrary measures, the cows have returned home.

Bond Yields Have Their Own Idea

  • The 10-year yield is up 8 basis point to 1.55%
  • The 30-year long bond yield is up 6 basis points to 2.31%
  • The 5-year yield is up 5 basis points to 0.78%

Powell has control of the short end but that's it. The 3-month yield is 0.04%.

Mish

Comments (10)
No. 1-8
Scooot
Scooot

“ It will take some time”
and as that time approaches, or perhaps before, judging by yesterday’s UK budget, they’ll be some fiscal tightening in an attempt to recoup some of the recent and current government spending.

Eddie_T
Eddie_T

It’s gonna take time.....and a whole lot of money.

RonJ
RonJ

And he added that the Fed is looking at “a broad range of financial conditions,” rather than a single measure.

To paraphrase Janet Yellen, financial conditions wear many hats.

anoop
anoop

he may not have calmed the markets today, but his voice was very calming for me.

Eddie_T
Eddie_T

They’re gonna be twistin’ the night away soon...no matter what he did or didn’t say.

Casual_Observer
Casual_Observer

Welcome to 21st century stagflation.

KidHorn
KidHorn

The FED can control whatever bonds it wants to. It can bring down 30 year rates by buying a bunch of MBS.

Which I think the FED will be forced to do since it looks like the Asians have stopped buying our bonds.

Chartist
Chartist

As someone who lived around dairy farms, I love that phrase "till the cows come home". If you haven't lived near farms, you'll probably have to google the phrase.


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