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Powell Again Falls Victim To Fed’s ‘Extreme FCI Reflexivity’
Jerome Powell this week re-learned a lesson taught time and again over the course of the Fed's most aggressive tightening campaign in a generation: If you give markets an inch, they'll take a mile.
Last month, a veritable procession of Fed officials used public speaking engagements and media cameos to suggest the sharp run up in long-end US Treasury yields since early August could stand in for the final rate hike tipped by the September dot plot.
This is a familiar tale by now. Most readers ca
Fed is stuck on the sidelines until early next year. It can’t hike in December – even if the next month’s data comes in “hot”, more than one month of heat will be needed, before Fed can restart hikes without looking foolish.
If the Fed loses control of the narrative, and somehow Consumers and Supply chains conspire to generate more Inflation (tight housing supply will certainly contribute), then the Fed looking foolish will be the least of their problems.
(Because having to fight inflation aggressively with their very blunt instruments will likely break some of the financial system)
Following this Central Bank week, I have developed a Kenny Rogers earworm:
BOE: You gotta know when to hold them
BOJ: Know when to fold ’em
ECB: Know when to walk away and know when to run
Fed: You never count your tightening, when you standing at the lectern …