Jerome Powell delivered what, on a quick read, sound like some perfunctory remarks at a “Fed Listens” event in Washington on Friday.
“As we kick off this 12th of 14 Fed Listens events, Governor Brainard, Governor Bowman, and I hope that today’s meeting is anything but stuffy”, Powell told an audience. “Candid and serious, yes. But not stuffy”.
No, “not stuffy”, because if there’s anything that gets temperatures to risin’ and blood to boilin’, it’s comprehensive reviews of strategies, tools and communications practices around monetary policy. Here are the only relevant lines from Powell’s opening remarks:
Now is a good time to conduct the review. Unemployment is near a half-century low, and inflation is running close to, but a bit below, our 2 percent objective. While not everyone fully shares economic opportunities and the economy faces some risks, overall it is–as I like to say–in a good place. Our job is to keep it there as long as possible. While we believe our strategy and tools have been and remain effective, the U.S. economy, like other advanced economies around the world, is facing some longer-term challenges–from low growth, low inflation, and low interest rates. While slow growth is obviously not good, you may be asking, “What’s wrong with low inflation and low interest rates?” Low can be good, but when inflation–and, consequently, interest rates–are too low, the Fed and other central banks have less room to cut rates to support the economy during downturns.
So, in this review, we are examining strategies that might better allow us to symmetrically and sustainably achieve 2 percent inflation. Doing so would help prevent inflation expectations among consumers, businesses, and investors from slipping too low, as they appear to have done in several advanced economies. More-firmly anchored expectations, in a virtuous circle, would help keep actual inflation around our target, thus preserving our ability to change interest rates as appropriate to meet our mandate. We are also looking at whether our existing monetary policy tools will be adequate when the next downturn comes. Finally, we are asking whether our communications practices can be improved to better support the effectiveness of our policy.
Again, there’s nothing in those comments that should be relevant for market participants, or at least not for traders.
Equities didn’t budge on the headlines, leaving the Goldilocks reaction to the September jobs report largely intact.
Around the same time Powell’s remarks were released, a handful of additional headlines crossed indicating the Fed chair chatted with Jamie Dimon and Michael Corbat on August 1, a day after the first rate cut since the crisis and the same day Donald Trump escalated the trade war.
Two weeks later, on August 14, Powell met with Brian Moynihan. That was the day the Dow plunged more than 800 points as the 2s10s inverted.
“Because Congress has granted the Federal Reserve significant protections from short-term political pressures, we have an obligation to clearly explain what we are doing and why”, Powell said Friday. “And we have an obligation to actively engage the people we serve so that they and their elected representatives can hold us accountable”.
Suffice to say one person who Powell “serves” is trying very, very hard to get Powell to “actively engage” in a dialogue.
So far, Jay hasn’t taken the bait.