A disappointing press conference
Stocks moved sharply lower on the disappointing forward guidance, which suggested “one and done”, and then recovered a bit when Powell clarified his remarks. It’s sort of surreal when reporters ask Powell to comment on the fact that hundreds of billions in wealth is being destroyed as he speaks, indeed because he speaks.
I was disappointed in the general thrust of questions from reporters. The markets clearly believe the move was too little, but most of the questioners seemed skeptical of the need for any move at all.
One reporter suggested that this move gave the Fed less room to cut rates in a future recession, which is nonsense. To his credit, Powell rejected the “premise” of her question, pointing out that the purpose of the move is to strengthen the economy, and thus give them more room to cuts rates in a future recession.
I would cut Powell a bit of slack, as I believe his remarks were probably somewhat constrained by splits on the FOMC committee. Overall it was a miss, but not a major one.
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31. July 2019 at 13:45
POTUS agrees with you.
http://magaimg.net/img/8lrf.png
31. July 2019 at 14:03
The Fed obviously has ammo at the ZLB, but are you also arguing that a rate cut would increase rates in the medium term?
31. July 2019 at 14:12
Jason, Yes, that’s likely. But the claim that cutting rates reduces ammunition is always wrong, regardless of where rates go in the medium term. Cutting rates tends to boost the equilibrium interest rate (i.e. natural rate), which is what people mean by “ammunition”.
31. July 2019 at 14:21
One more question, you recently described the natural rate as falling rapidly. How do we know this to be true considering that the natural rate is unobservable?
31. July 2019 at 14:59
Trump’s tweet is gold. Trump seems to be more in agreement with Scott than the Fed. Of course, Scott would never admit that, but it’s true. (Scott is exploding right now and and clenches his fist, then knocks over his desk.)
31. July 2019 at 15:05
Admitting any truth is always a personal ego risk for America hating liberals, because at any moment it can contradict the manufactured narrative meant to keep them voting for D’s and having to live in rat infested cities while they scream “racist!” at the moon.
https://twitter.com/bennyjohnson/status/1156323193977757697
31. July 2019 at 15:11
“Let’s hope the Democrats win in 2020”
https://i.imgur.com/AZAd6BU.png
31. July 2019 at 15:18
“Let’s hope the Democrats win in 2020”
Every Democrat candidate for President wants to abolish private healthcare, and give free healthcare to illegal immigrants.
Without vote fraud, the D’s can’t win elections.
This is why they don’t want a wall or border security.
Nothing to do with ‘racism’.
31. July 2019 at 15:24
“Vote for us or else….you’re racist!”
https://imgur.com/hmJM3w7
31. July 2019 at 16:15
The media is odd.
Here is how Peter Barker of the New York Times framed the day:
Peter Baker
✔
@peterbakernyt
Under pressure from Trump, Federal Reserve cuts interest rates for the first time in more than a decade, an effort to guard the record-long economic expansion against mounting global risks.
—30—
Also, it seems to be a accepted premise that Trump’s tariffs on 250 billion dollars worth of Sino imports into the US are causing a global slowdown and threaten a global recession.
That is, a 50 billion dollar tax increase by the United States, which currently collects 3.9 trillion a year in taxes, is enough to tip over the global economic applecart.
31. July 2019 at 18:01
“Also, it seems to be a accepted premise that Trump’s tariffs on 250 billion dollars worth of Sino imports into the US are causing a global slowdown and threaten a global recession.”
Not for America! The ‘global slowdown’ is in reality a rebalancing of the world’s nations as they can no longer benefit at the expense of the American worker, and their slowdown is a return to self-reliance.
“Seems to be an accepted premise” = Fake news narrative
31. July 2019 at 18:29
Jason, You try to infer what’s happening by looking at a wide range of indicators.
TIPS spreads show weak inflation going forward, despite rapidly falling interest rates in the fed funds futures markets. You are correct that we don’t know the equilibrium rate is falling, but just as in 2008 there is a lot of indirect evidence pointing that way.
Christian, You can take solace that you are no longer the dumbest commenter here.
As far as Trump’s views, why would I care whether I agreed with him or not? In any case, I have no idea what Trump’s views on monetary policy are, and you don’t know either.
31. July 2019 at 18:50
“Christian, You can take solace that you are no longer the dumbest commenter here.”
This is proof you can’t counter the arguments. Low IQ.
“As far as Trump’s views, why would I care whether I agreed with him or not?”
Since you suffer from TDS, you tell us.
1. August 2019 at 01:00
Neon__Wolf
A – “This is proof you can’t counter the arguments. Low IQ.”
B – (I’ll explain “B” later)
C – You’ve got no solid argument in the first place :
1/ “POTUS agrees with you.” Not an argument, and not even a fact (the post is mostly about “reporters”, it’s not the case in the Trump’s Tweets).
2-1 /”Admitting any truth is always a personal ego risk for America hating liberals, because at any moment it can contradict the manufactured narrative meant to keep them voting for D’s and having to live in rat infested cities while they scream “racist!” at the moon.” Obvioulsy I don’t know any “D’s (…) having to live in rat infested cities while they scream “racist!” at the moon.” And again, not an argument.
2-2/ “Admitting any truth (…) can contradict the manufactured narrative” May be, but you can say exactly the same about R’s (and obvioulsy it’s even more a good description). So, what’s the point when the post is mainly about “reporters” asking not so good questions to a Trump appointee ? So, your blablaism’s not an argument.
3-1/ ““Let’s hope the Democrats win in 2020” Not an argument
3-2/ “Every Democrat candidate for President wants to abolish private healthcare, and give free healthcare to illegal immigrants.” If it’s an argument (in you’re little mind it’s not even an argumpent, it’s a fact), it’s a very bad one. For example : https://ritholtz.com/wp-content/uploads/2019/08/healthcare.png
3-3/ “Without vote fraud, the D’s can’t win elections.” Even if you take that as an argument, what’s the point with the post about this press conference ? So that’s not an argument in this context. And it’s not a response to another comment.
3-4/ “This is why they don’t want a wall or border security.
Nothing to do with ‘racism’.” See my 3-3 point (not an argument).
4/ “Vote for us or else….you’re racist!” See my 3-3 point (not an argument).
5-1/ ““Also, it seems to be a accepted premise that Trump’s tariffs on 250 billion dollars worth of Sino imports into the US are causing a global slowdown and threaten a global recession.”Not for America! The ‘global slowdown’ is in reality a rebalancing of the world’s nations as they can no longer benefit at the expense of the American worker, and their slowdown is a return to self-reliance.” Ah ! At least ! One argument in relation to the topics (and to a comment). But, I’m afraid, not a very good one, indeed… You don’t understand basic international economic (so it’s not an argument since you’re writing in a mainly economic blog). For example : https://ec.europa.eu/eurostat/statistics-explained/index.php?title=USA-EU_-_international_trade_and_investment_statistics&oldid=368909
It’s a dangerous game for all of us (I’m european, yes one of this terrible bunch of morons !), but don’t listen to sound data as you’re in the rumbling of the Titanic’s Orchestra…
5-2/ “Seems to be an accepted premise” = Fake news narrative” Again, not an argument. To argue something you need to start proving you’re point. In this case, the “accepted premise” is obvioulsy in adequacy with the Fed’s move. Maybe it’s not the main factor of the move. I think, you’re idea is : “Trump did the thing (not the context of the decision but the decision itself)”. But, if it’s true, it’s not a good argument for a republican, because the independance of the Fed is deeply rooted in the political philosophy of this party (what I mean by that : it’s not just a question of good economic principles). So, even if my guess about you’re thinking (but you don’t give us an argument), you’re political stance is in bad shape (and Peter Baker from NYT agree with you…).
6-1/
A – “This is proof you can’t counter the arguments. Low IQ.” =>
B – there’s not a single good argument
=>
C – No need for ssumner to counter any of “them”.
6-2/ ““As far as Trump’s views, why would I care whether I agreed with him or not?” Since you suffer from TDS, you tell us.” The best at the end ! Good job Neon__Wolf, you’re so deeply and obviously wrong with this particular quote => that’s pure joy for me and I can’t thank you for that. You’ll make my day.
1. August 2019 at 03:20
http://archive.is/lRxSi
“The Bureau of Economic Analysis (BEA) on Tuesday published its annual revisions to personal income data, and the surprise was the huge jump in disposable income and employee compensation.”
“The revisions show that employee compensation rose 4.5% in 2017 and 5% in 2018—some $4.4 billion and $87.1 billion more than previously reported. The trend has continued into 2019, with compensation increasing $378 billion or 3.4% in the first six months alone. Wages and salaries were revised upward to 5.3% from 3.6% in May year over year. And in June wages and salaries grew at an annual rate of 5.5%, which is a rocking 4.1% after adjusting for inflation.”
1. August 2019 at 05:28
Scott, you let your rationality and sense of fairness get the best of you. The Fed should not be setting Fed Funds rates. I have no idea what Powell really thinks, and certainly do not care what the press really thinks, but I had been hoping, stupidly, that Powell learned a lesson from his statements last December. I was hoping he was becoming more of a market based Chairman—-recognizing he still has to live under the rules he is given. My guess is he tries to diffuse the cacophonous noises like——being called a Trump lackey, the PHDs clever models, the various self appointed “grown-ups” like the WSJ editorial board, or even more absurdly, being accused of responding to “temper tantrums” of the market, as if the “market” were some small cabal of Individuals setting their version of prices.
Or maybe, he is just falls to the default position of so many Fed Chairman——in the end, they just can’t help it—they must tighten.
1. August 2019 at 05:31
Scott, why doesn’t the 5yr forward breakeven inflation index of 1.99 indicate that the Fed didn’t miss by much? Yes, it’s lower than 2.04 on 7/23/19 but it’s meaningfully higher than 1.77 on 6/17/19 and 1.78 on 7/4/19, right?
Bloomberg: USGG5Y5Y Index
1. August 2019 at 05:39
As one of the low knowledge commenters——I at least know that—-I dislike when any blog is inundated with multiple entries from one source.
1. August 2019 at 05:50
“It’s sort of surreal when reporters ask Powell to comment on the fact that hundreds of billions in wealth is being destroyed as he speaks, indeed because he speaks.” Hundreds of billions or the illusion of hundreds of billions? I appreciate that currently rising asset prices is not only the default path to prosperity, but the only path to prosperity. How can we change that?
1. August 2019 at 05:59
The 1-year, 2-year, and 3-year bond all saw yields rise yesterday. Is the market saying “the more aggressively you cut now, the less you will have to cut overall.”?
Seems to be a pattern with Powell. Between the announcement and the press conference, long-term yields briefly spiked, but after “one and done” bond yields moved sharply lower. The trend continues at the opening today, even the short-term yields are below yesterday.
A little Chuck Norris goes a long way Jay.
1. August 2019 at 06:01
Reporters are clueless, and mainstream Wall Street views of what the Fed is and does are shockingly ignorant.
1. August 2019 at 08:19
Brian, Yes, bigger cuts now would mean smaller cuts later.
1. August 2019 at 09:59
PK, That spread implies PCE inflation of about 1.74%, as it runs 1/4% below the CPI.
In any case, I prefer the 5-year TIPS spread to the 5-year forward spread.
Michael, You said:
“Scott, you let your rationality and sense of fairness get the best of you. The Fed should not be setting Fed Funds rates.”
Sorry. In the future I’ll try to tone down my rationality and sense of fairness. Perhaps reading Neon Wolf will help me to reform.
Seriously, I agree on interest rates.
1. August 2019 at 11:22
Scott,
Trump clearly said what he was thinking:
Of course you don’t take him seriously. You always act like this when it comes to certain of his policies. But I don’t think your approach is logical and consistent, because you take many other statements by him at face value. That’s childish in my opinion. One way or the other, Scott. You can’t have it both ways. You always want to have it both ways.
This was your harshest hitjob on me so far. So you are telling me that I am dumber than, for example, Harding??? That’s really harsh. You really think that? That casts a worse light on you than on me. So think again.
I think this new guy will disappear very soon. Then you can give me the top spot again, if you really want to.
1. August 2019 at 15:20
OK I have to admit I thought Neon Wolf’s screenshot was a gag, but I guess it’s real. Trump must have a market monetarist in his inner circle. Good chance that market monetarist reads Sumner. Because I suspect the universe has an amazing sense of humor, I bet Scott inadvertently and indirectly helps Trump get reelected in 2020. That’d be first-class irony, not “irony” but actual literary irony.
1. August 2019 at 16:46
myb6,
It’s real, Trump wrote it just like that on his Twitter account. Just google it.
https://twitter.com/realDonaldTrump/status/1156666163310530560
2. August 2019 at 08:24
Christian, So we can infer Trump’s views on something from what he says? Are your seriously that naive?
OK, Trump says he’s going to pay off the entire national debt in 8 years. Do you believe those are his actual views on fiscal policy? He also says he believes in free trade. You are like a drowning man grasping for a log to hold on to. “Trump said this!”
2. August 2019 at 12:09
Scott,
Real yields were pretty stable pre/post the press conference, so the Fed struck the right balance (paraphrased from a research piece yesterday). How would you / market monetarists respond?