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‘This Is An Important Development’: Lael Brainard Turns Hawkish, You’re All Fucked
Lost in the Cohn shuffle was Lael Brainard, and you don't want to lose track of Lael Brainard.
On Tuesday evening, at a speech in New York to the Money Marketeers of New York University (and yes, that's fucking hilarious), the uber dove came across as some semblance of hawkish, reiterating Jerome Powell's comment about "headwinds shifting to tailwinds."
Specifically, she said this:
In many respects, the macro environment today is the mirror image of the environment we confronted a couple o
Gotta love the jawboning from the Fed’s Board of Governors.
They may not know what they’re doing re: monetary or fiscal stimulus, but they have perception (mis)management down to an art form.
In any case Lael Brainard is part of the inner circle, so her comments are important.
They want to get interest rates above 3% so they’ll have room to cut them again when the SHTF. The problem is: They’ll trigger the crack-up in the process.
I saw bits of that live on the DailyFX feed. She was still dovish on the labor and wages data, which was always been the most important data to both Yellen and Yellen’s confidante Lael Brainard.
I’ll bet anyone that 4 hikes aint gonna happen; I’ll give high odds there won’t be 5 and probably not even 3.
The US debt and Fed balance sheet are too big to handle rate hikes, and the optics of huge interest payments from the Treasury to the Fed (even tho they don’t really matter) would be embarrassingly fugly particularly in an election year.
Maybe 1-2 hikes, so will disappoint expectations. Yet another reason for a weakening dollar.
The Fed cannot lose the aura of the “Great Powerful Oz” –hikes are inevitable unless it restarts QE.