News

Stocks Pump’n’Dump On Fed Financial Stability Fears

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.

MORE

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s