A Decade And $5 Trillion Later

A Decade And $5 Trillion Later

The Fed will normalize policy "as we move through 2022," Jerome Powell told US lawmakers on Tuesday, during his confirmation hearing. Although he emphasized that the Fed will cease growing the balance sheet in March, as planned, he was careful to avoid telegraphing anything about a date for the onset of runoff, saying only that it'll commence "perhaps later this year." The US economy, Powell said, "no longer needs or wants" highly accommodative policies. But the market does. Stocks "need" loos
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8 thoughts on “A Decade And $5 Trillion Later

  1. I wish someone had the temerity to ask Chairman Powell “Just how will higher interest rates temper inflation? How does that work?” and as a follow-up to his wiggly answer “And who will it impact most?” Get it out there explicitly.

    It’s not Elon Musk.

    Meanwhile, to put it into context here’s an interesting observation from Edmunds about the average used car price hitting $29,011. “For the first time anyone can recall, more than half of America’s households have less income than is considered necessary to buy the average-priced USED car.”

  2. If expectations for Fed getting more hawkish are “maxed out” in the near term, and at the same time Fed has made such a fast/hard hawkish pivot in recent days that it can’t credibly start talking less hawkish for awhile, does that mean the “Fed factor” is kind of pinned in the near term? Absent a dramatic change in inflation trend (like suddenly dropping < 5% or jumping > 10%).

  3. While I’m glad that the Fed is finally acknowledging that runaway inflation needs to be corrected, now we’re on the flip side of 5 months ago. Then they said they thought inflation was transitory and not worth dealing with, now they are dealing with it but not telegraphing to what degree. Assuming this is a technically driven policy normalization, what specifically are they targeting with the policy moves? X% reduction in home prices, used cars, risk assets, etc? Without a target then they are really just playing with fire in my opinion, one that could burn the whole damn city down.

  4. The Fed needs precise arthroscopic tools to operate on the economy, but find only axes and hand saws in their closet. Hopefully they don’t go all medieval, a la the “cure” for the participation rate is an engineered downturn to wring the newly-found courage back out of labor, thereby preserving profit margins, exec pay packages and index levels.

    1. @furious one – spot on there.

      If a CB is worried about home price inflation, just tweak mortgage down-payment rules on second, third and buy-to-rent purchases. Most other central banks use that lever. Why doesn’t the US Fed do so?

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