Powell Promises Patience: So What? It Doesn't Matter

At a speech in Atlanta, Fed chairman Jerome Powell promises patience and walked back his autopilot statement. So what?

No Preset Path

“As always, there is no preset path for policy,” Powell said. “And particularly with muted inflation readings that we’ve seen coming in, we will be patient as we watch to see how the economy evolves.”

Balance Sheet Reduction

The above statement is amusing given that Powell discussed a balance sheet autopilot following the December 19 FOMC meeting.

We thought carefully about how to normalize policy and came to the view that we would effectively have the balance sheet run off an automatic pilot and use monetary policy, rate policy to adjust to incoming data. I think that has been a good decision. I think that the runoff of the balance sheet has been smooth and has served its purpose and I don't see us changing that. And I do think that we will continue to use monetary policy, which is to say rate policy as the active tool of monetary policy.

Autopilot Off

Apparently, the autopilot is now off.

So What? It Doesn't Matter

None of this matters in the least. One additional rate hike will not tip the economy into recession. One rate hike less, or even a rate cut will not prevent a recession.

Economic imbalances are staggering following decades of Fed officials blowing repetitive economic bubbles of increasing amplitude.

Dot Thought Thickens

 

That's what the dot plot of expected rate hikes looked like in December. It will not look that way following the next FOMC meeting.

Over time, the dot plot always thickens.

The December meeting will show unanimous or near-unanimous opinion that the Fed is doing a brilliant job for the current year.

What Does Matter

 

Suddenly, There's No Appetite for Bond Deals as Spreads Widen. And the BIS Fears "Bulge of BBB Debt" and "Financial Cycle" Default Waves.

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