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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 recoverPowell 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 ratesPowell 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.
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
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.”
[b] San Francisco Fed President Daly:
[/b]
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 workFOMC minutes: of the July 28-29 FOMC meeting
Highlights
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 usFeds 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)
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