Lower (rates) for longer (at least 2024) but inflation, growth, and rate projections are all inconsistent. As Peter Boockvar at Bleakley Advisory Group points out the committee cut its 2021 GDP forecast to 4% from 5%, while at the same time lowering forecasts for the unemployment rate to 5.5% from 6.5% and raising core PCE estimates to 1.7% from 1.5%.
“No color on the inconsistency,” says Boockvar.
“They somehow think that the longer-run fed funds rate should be 2.5% but they have no intentions on trying to get there for the next 3 years, even if we get a vaccine, which we know is the main reason why we’re in the circumstances we are in.”
Stocks didn’t care – they just rallied (while everything else largely shrugged) and everything was looking good… until Powell was asked about financial stability (in other words – bubbles):
“Monetary policy should not be the first line of defense,” Powell says, noting regulatory tools should be the first line.
“We always leave open the idea that we will not ignore those kinds of risks.”