The kind of confusion over signaling is the kind of thing that Powell will need to avoid when the Fed…
The kind of confusion over signaling is the kind of thing that Powell will need to avoid when the Fed gets close to the end of its tightening cycle. It is also important to remember because Fed continues to liquidate its balance sheet, which is charged with approximately $ 4 billion in bonds purchased to stimulate the economy.
There is doubt that things can go smoothly.
“In sum, what happens, Powell looks forward to his belief that he can let the economy steer and thereby keep the funds interest stable over a longer period like [Alan] Greenspan did in the mid 1990s,” Steven Blitz, Chief American economist at TS Lombard, said in a note referring to the former Fed chairman.
“We believe [Powell̵
7;s] faith will be misunderstood – the situation is so different,” added Blitz.
There is another wrinkle forward for Powell and the markets: News Conferences after each meeting from January 2019, meaning that whenever the Federal Open Market Committee is gathered to speak politics, an interest rate increase is possible. Previously, the Fed chairs have met the press only after quarterly meetings, and the committee has not raised interest rates once without the ability to explain why afterwards.
The potential is for clarity – or confusion.
The market has suddenly taken an optimistic attitude to Fed – “symptomatic of despair” and “grips” how Gluskin Shuff’s strategy and economist David Rosenberg expressed it. It could easily be denied by a single lowering of the tongue publicly, as Powell has already discovered.
“It will be very important,” said Prudentials Krosby. “The Treasury market and the other markets will look at.”