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
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.
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.
Welcome to 21st century stagflation.
Of course, the big question is whether any of the Fed’s actions actually benefit the real economy. Probably not. Higher asset price do not equal economic growth and liquidity does not equal solvency.
They’re gonna be twistin’ the night away soon…no matter what he did or didn’t say.
he may not have calmed the markets today, but his voice was very calming for me.
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.
It’s gonna take time…..and a whole lot of money.
“ 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.
Not sure whether you mean the US will act as the UK, or the UK has acted in anticipation of US conditions (or even what is the distinction).
I personally see the UK budget as an anticipation of USA borrowing rates increasing and a desire to not be the ugly one in the world.
My opinion aside, whether it is precautionary, or whether Rishi has some advance notice/prediction of Fed tightening (don’t know if the central banks collude like that you could see the benefits though with BOJ ECB etc), or whether due to anticipation of market tightening, who knows for certain.
Whichever though, clearly the UK is scared of borrowing costs outpacing their response and the UK is unfortunately not the US and has to be less ugly than other countries to hold things together. So the UK does not see a surfeit of available funds.
I was suggesting that all major countries, including the US, would act as the UK, to lesser or greater degrees as they’re all in exactly the same boat. The US to less perhaps because the dollars current reserve currency status gives them more leeway. The UK have clearly recognised they’ll need to try and put their finances in better order at some point. They’re also going to have to face doing so at the time the current government’s term is up so maybe they think it’s better to announce it now rather than later. Regardless, in my opinion, other countries are sure to follow, otherwise their currencies and or bond markets will suffer. I doubt the US would totally ignore this trend. Therefore, some sort of global fiscal tightening is on the horizon.