“Maybe”, We could ”Powell’s tapering (FED) is dove-gray

The Jackson Hole conference (actually virtual) gave rise to what Americans call a "Nothingburger", a nothing.

The biggest result of Powell's speech is what we already knew from the FOMC minutes, namely that " at the recent July FOMC meeting, I was of the opinion, like most of the attendees, that if the economy evolves as broadly as expected, it may be appropriate to start reducing the pace of asset purchases this year ”. Powell also notes that " the timing and pace of the next reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate take-off, for which we have articulated a different and substantially more rigorous test " . That is, maybe, but maybe, we will reduce purchases, but that does not mean that we will increase interest rates. . In other words, the familiar and banal slogan of 2013: "tapering is not tightening" "tapering is not monetary tightening"

Most important to the markets is that Powell's remarks failed to provide a specific timeline, which can be considered particularly dovish. So this was a “Non-event”, a “Nothingburger”.

Some other highlights from his speech via Bloomberg:

• Work progressed from July FOMC but Delta has spread
• It cannot be assumed that transient inflation will fade
• If the employment situation improves, inflation returns to target
• Current inflation A concern but probably temporary
• There is still a lot of room before we get to full employment there
• An inappropriate monetary policy move could be particularly damaging (i.e. better do nothing)
• Delta poses short-term risks, but job prospects are good
• Long-term inflation expectations consistent with the 2% target

Other highlights, on politics …

• The incoming data should provide further evidence of improving some supply / demand imbalances and further evidence of continued moderation in inflation, particularly in the prices of goods and services that have been most affected by the pandemic.
• A focus on incoming data and evolving risks offers useful guidance for today's unique monetary policy challenges.
• "At the recent July FOMC meeting, I was of the opinion, as did most of the attendees, that if the economy had evolved widely as expected, it would be wise to start reducing the pace of asset purchases this year."
• The following month brought further progress in the form of a strong employment report for July, but also the further spread of the Delta variant
• The underlying perspective is for continued progress towards maximum employment, with inflation returning to levels consistent with our target of 2% average inflation over time.
• The Delta variant presents a short-term risk, the outlook is good for continued progress towards maximum employment.

Inflation

• Responding to temporary fluctuations in inflation can do more harm than good, particularly at a time when policy rates are much closer to the effective lower bound even in good times
  If sustained inflation were to become a serious concern, the Fed would certainly respond and use tools to ensure that inflation is consistent with the target.

Occupation

• There is still a lot to do to reach maximum occupancy
  However, despite Powell reiterating his comments on the FOMC minutes, the speech is particularly accommodating, with Powell saying it would be wrong to respond to temporary fluctuations in inflation. "Indeed, responding can do more harm than good, particularly in an era where policy rates are much closer to the effective lower bound even in good times." As Bloomberg notes, the more you read the full text of the speech, the more accommodating it is.

In short, all as expected.

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The article "Maybe", We could "The tapering of Powell (FED) is a dove comes from ScenariEconomici.it .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/forse-potremmo-il-tapering-di-powell-fed-e-da-colomba/ on Fri, 27 Aug 2021 18:37:36 +0000.