Automatic Pilot Spotlight

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Let's flashback to Fed Chair Jerome Powell's statements following the December 19 FOMC meeting.

Powell was asked about the Fed's balance sheet and quantitative tightening.

We thought carefully about how to normalize policy and came to the view that we would effectively have the balance sheet run off on automatic pilot and use monetary policy, rate policy to adjust to incoming data. I think that has been a good decision. I think that the runoff of the balance sheet has been smooth and has served its purpose and I don't see us changing that. And I do think that we will continue to use monetary policy, which is to say rate policy as the active tool of monetary policy.

I commented Shut Up! Shut Up!

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Automatic Pilot

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Automatic pilot, what a hoot.

Today, I repeat, "What a Hoot".

The 7-year, 5-year, and 3-year notes all all about 50 basis points lower. And the yield curve is inverted in 28 places.

Yield Curve to Scale

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Synopsis

  • The yield curve is inverted from the 1-year note through 13 years.
  • The yield curve is inverted from the 3-month T-bill through the 10-year note.
  • The yield curve is inverted in 28 places.

Those who thought the recession signal was over, thought wrong.

Mike "Mish" Shedlock