Jackson Hole: The Fed Taper

Federal Reserve Chairman Jerome Powell indicated that the central bank is likely to begin withdrawing some of its stimulatory monetary policies before the end of 2021. However, the Chairman did note that he still sees interest rate hikes off in the distance. In the Fed’s annual Jackson Hole, Wyoming, symposium, Powell said the economy has reached a point where it no longer needs as much monetary policy support.

Thus, the Fed will likely begin cutting the amount of bonds it buys each month before the end of the year, so long as economic progress continues. Based on statements from other central bank officials, a tapering announcement could come as soon as the Fed’s Sept. 21-22 meeting. Despite this pivot, it does necessarily mean rate increases are looming.

This pivot in monetary policy by the Federal Reserve sets the stage for the initial reduction in asset purchases and downstream interest rate hikes. As this pivot unfolds, risk appetite towards equities hangs in the balance. The speed at which rate increases hit the markets will be in part contingent upon inflation, employment, and of course, the pandemic backdrop. Inevitably, rates will rise and likely have a negative impact on equities.

Rates Hikes

Jerome Powell stated, “The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff, for which we have articulated a different and substantially more stringent test,” He added that while inflation is solidly around the Fed’s 2% target rate, “we have much ground to cover to reach maximum employment,” which is the second prong of the central bank’s dual mandate and necessary before rate hikes happen. Continue reading "Jackson Hole: The Fed Taper"

Fed Can't Backtrack On Regulatory Reforms

George Yacik - INO.com Contributor - Fed & Interest Rates


I’ve been pretty harsh in this column on Federal Reserve monetary policy, but the one area that I haven’t written much about– financial regulation – is probably the main area where the Fed does deserve a lot of credit.

In her speech at the Jackson Hole symposium late last week, Fed Chair Janet Yellen probably disappointed a lot of market watchers for her failure to talk about interest rates or unwinding the Fed’s balance sheet. Instead, she spent most of her speech defending the Fed’s actions in the regulatory realm in the wake of the global financial crisis and pushed back against critics who want to roll back those regulations, including President Trump, who vowed that he wants to “do a big number” on Dodd-Frank.

If Yellen wants to be reappointed to her position by Trump when it ends in February, she certainly didn’t sound like it. Then again, making comments in opposition to Trump is hardly a heroic stance.

Still, she deserves credit for defending the Fed’s position on bank regulation, and the next Fed chair, whether it’s Yellen, Gary Cohn, or someone else, should stick with the current policy, which will go a long way toward keeping our banking system safe and secure and make sure that the global financial crisis doesn’t repeat itself. After all, if you can’t trust keeping your money in a bank, nothing else matters. Continue reading "Fed Can't Backtrack On Regulatory Reforms"