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Jerome Powell Relearns A Lesson He Taught In 2012: ‘It Will Never Be Enough For The Market’

Jerome Powell described the Fed's new, outcome-based forward guidance as "strong and powerful" on Wednesday, during his virtual Q&A with the media. If I may be so presumptuous, Powell came across as less confident compared to the sure-footed demeanor he discovered in March, when the pandemic delivered to the Fed chair a sense of purpose he seemed to lack previously. "Over time forward guidance will provide very powerful support for the economy", he said, editorializing around the new FOMC statement, which explicitly linked rate hikes to the achievement of full employment. "Guidance is a strong and powerful thing", Powell pressed. Read more: Fed Adopts Outcome-Based Forward Guidance, Will Keep Rates Near Zero For At Least 3 Years It's easy to chuckle, but Powell is right. Forward guidance, when it's credible, is indeed "powerful". In fact, forward guidance goes quite a way towards explaining why market-based measures of volatility slumbered through all manner of geopolitical tumult from 2015 all the way through the end of 2017. It was forward guidance, reinforced by asset purchases from the ECB and the BoJ (among others), which inflated the short vol bubble in all its va
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3 comments on “Jerome Powell Relearns A Lesson He Taught In 2012: ‘It Will Never Be Enough For The Market’

  1. steve says:

    market is hooked 4ever

  2. MMcCann says:

    The Fed clearly has the tools to decrease the value of assets held by the rich, and this would seemingly also narrow the wealth gap. So there’s always that …

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