Fed chair Powell speaks at New York economic club
- Economy is very resilient, growing strongly
- Growth is running above its longer run trend. That is a surprise
- Economy is a story of stronger demand.
- May be ways economy is less affected by interest rates.
- Interest-sensitive spending is a showing impact of Fed policy.
- We see policy working through usual channels
- I don’t think there is a fundamental shift in how rates affect economy.
- We are seeing a change in the exchange rate which is disinflationary
- The fact that we have a strong economy and job market, these are elements we want to see
- No precision in understanding monetary policy lags.
- Markets have been front running Fed policy changes.
- Household savings are higher, spending has been higher.
- We should be seeing effects of monetary policy arriving
- Fed has slowed on rates to give policy time to work.
- We have to use eyes and risk management to monitor monetary policy impact
- There is a lot of uncertainty on lags
- We are moving carefully with policy decisions.
- Long-run potential growth doesn’t change much. It is around 2%
- It is very hard to know how economy can grow with higher rates
- Doesn’t know where monetary policy will settle.
- Effective lower bound is not an issue for economy, monetary policy.
- By any reckoning, neutral rates ebbed over recent decades, unsure where it is now
At 12:33 PM ET. Dow industrial average -0.08%. NASDAQ index of -0.24%. 10 year yield 4.957% +5.6 basis points. 2 year yield 5.182% -3.6 basis points.
- Models useful but have to look at what the economy is telling us
- The evidence is not that policy is too tight
Stocks start to move lower after the last comment (NASDAQ down -0.56%). EURUSD moves back to the 200-hour moving average at 1.05636. 10 year yield 4.987% +8.8 basis points. 2 year yield 5.212% -0.4 basis points
- It’s possible we are going into a more inflationary period, but it’s hard to know
- Feds issue is trying to get policy right to bring inflation back to 2%.
- With hindsight possible Fed could have done less during pandemic
- Our economy is doing very well.
- We were in a time of disinflation. That period is over. We are now more in a balanced period.
- The possible range of events is now so much wider
- Bond yields analysis needs humility
- Bond yields rise driven by term premiums
- Bond yields are not about expectations of higher inflation