Federal Reserve Continue Same Path of QE Cites Economic Activity and Employment

Viewing 12 posts - 1 through 12 (of 12 total)
  • Author
  • #24261
    Helmholtz Watson

    The Federal Reserve kept rates unchanged at their…



    ZIRP + QE forever = SWEET FEED for the BULLS on WALL STREET

    Helmholtz Watson

    Powell opening statement:

    Household spending rebound got help from timely fiscal support
    Employment rose strongly in May/June
    Business fixed investment yet to show recovery
    Q2 contraction likely to be largest on record (report is tomorrow)
    Fed will do what we can for as long as it takes
    Path forward for economy going forward is extraordinarily uncertain
    Some measures of consumer spending via debt and credit cards have moved down since June
    Recovery is unlikely until people feel safe
    We see signs that rise in virus cases are weighing on economy
    We will continue to use powers until we’re confident in recovery
    Current economic downturn is severe, will take continue fiscal and monetary support to recover

    Helmholtz Watson

    Powell Q&A:

    Dollar swap lines extended as a backstop
    There’s nothing going on in any market that raised dollar funding concern
    Housing remains an area of strength
    On balance, the data points to a slowing in the pace of recovery
    It’s too early to say how large and sustained it is
    We know what the lockdown looks like, then there was the reopening and we expected many, many people to go back to work
    Our job isn’t to plan for the best case. There is great uncertainty around the development of therapeutics and vaccines
    I think ‘for quite some time’ we’re going to be struggling against disinflationary pressures, not inflation
    We think our policy is in a good place but we’re ready to adapt when we think it’s appropriate
    Repeats that they’re not even thinking about thinking about raising rates

    Helmholtz Watson

    Powell adds:

    Some humility is appropriate in forecasting where the economy is headed. It looks like we’re seeing a slowdown in the rate of growth. The timing of it seems to be related to the spike in cases in mid-June. We’re just going to have to wait and see.

    Helmholtz Watson

    Would you take advice from this man?

    Fed Gov Barkin Wins Captain Obvious Quote Of The Day
    “Low interest rates may be encouraging demand for stocks” #FFS #NoclueFed

    Helmholtz Watson

    Fed’s Rosengren says it’s too early to worry about significant inflation

    Rosengren said not concerned about inflation because unemployment is 10.4%.

    Consider this, in May 1977, Hubert Humphrey told President Carter: “In every period in our history, a rise in unemployment has been accompanied by a rise in inflation.”

    Helmholtz Watson

    [b] San Francisco Fed President Daly:
    COVID-19 is going to accelerate workplace trends and leave some workers without the right skills
    Fed has been hard-pressed to achieve 2% inflation target
    There is very little evidence that extra unemployment benefits are deterring people from going back to work

    Helmholtz Watson

    FOMC minutes: of the July 28-29 FOMC meeting


    Participants also noted that a highly accommodating stance of monetary policy would likely be needed for some time
    Participants observed that uncertainty surrounding the economic outlook remained very elevated
    Only saw modest benefits from yield caps, many noted they were ‘not warranted’ now but should remain an option
    Fed staff forecasts less robust H2 recovery due to virus case rise

    “In contrast to the sizable rebound in consumer spending, participants saw less improvement in the business sector in recent months, and they noted that their District business contacts continued to report extraordinarily high levels of uncertainty and risks”

    In addition, many participants commented that it might become appropriate to frame communications regarding the Committee’s ongoing asset purchases more in terms of their role in fostering accommodative financial conditions and supporting economic recovery.

    Participants discussed the current stance of monetary policy and the circumstances under which they might increase monetary policy accommodation or clarify their intentions regarding policy. Participants generally judged that the Committee’s policy actions over the past several months had provided substantial accommodation; several of them observed that the Committee’s asset purchases, which were designed to support financial market functioning and the smooth flow of credit, were likely also providing a degree of policy accommodation. Noting the increase in uncertainty about the economic outlook over the intermeeting period, several participants suggested that additional accommodation could be required to promote economic recovery and return inflation to the Committee’s 2 percent objective. Some participants observed that, due to the nature of the shock that the U.S. economy was experiencing, strong fiscal policy support would be necessary to encourage expeditious improvements in labor market conditions.

    With regard to the outlook for monetary policy beyond this meeting, a number of participants noted that providing greater clarity regarding the likely path of the target range for the federal funds rate would be appropriate at some point. Concerning the possible form that revised policy communications might take, these participants commented on outcome-based forward guidance-under which the Committee would undertake to maintain the current target range for the federal funds rate at least until one or more specified economic outcomes was achieved-and also touched on calendar-based forward guidance-under which the current target range would be maintained at least until a particular calendar date. In the context of outcome-based forward guidance, various participants mentioned using thresholds calibrated to inflation outcomes, unemployment rate outcomes, or combinations of the two, as well as combinations with calendar-based guidance. In addition, many participants commented that it might become appropriate to frame communications regarding the Committee’s ongoing asset purchases more in terms of their role in fostering accommodative financial conditions and supporting economic recovery. More broadly, in discussing the policy outlook, a number of participants observed that completing a revised Statement on Longer-Run Goals and Monetary Policy Strategy would be very helpful in providing an overarching framework that would help guide the Committee’s future policy actions and communications.


    Powell at Jackson Hole

    Emphasizes moderate overshoots and that they won’t be permanent
    This won’t be a formulaic approach
    This to us seems to be the right ‘make up’ strategy
    We need more direct aid to small businesses but that’s an area where fiscal policy can do much more than us

    Helmholtz Watson

    Feds Lael Brainard voting member on the FOMC board of governors

    Cautious on economy saying:

    Important that Fed policy pivots to accommodation from stabilization in coming months
    US economy faces uncertainty, risks tilted to the downside
    Coronavirus is most important economic factor. Timing and size of fiscal support is also key
    New policy framework breaks ground puts Fed in a stronger position to support recovery
    If new framework had been in place several years ago, job gains would have been bigger
    New framework means Fed will not preemptively withdraw support
    Underlying trend of inflation is below Fed’s 2% goal
    Mechanical average inflation target would be difficult to explain and implement
    Reviewing framework every 5 years can provide insight into appropriate makeup period for inflation (per chair Powell presented the new frame last week)


    San Francisco Fed’s Daly says that in her lifetime the role of fiscal policymakers has never been stronger

    – All spending is not equal, fiscal agents should invest to build productivity, education, climate resiliency, opportunity

Viewing 12 posts - 1 through 12 (of 12 total)
  • You must be logged in to reply to this topic.