The US jobs report vindicated the FED’s view on the economy but Powell had to backtrack today on previous statements perceived by markets as hawkish. Now comes patience and flexibility. Markets wanted the FED to stop tightening and stock prices to continue to rise for ever. 1/n
For market commentators the market correctly foresees the future and when they say market they mean the stock market. They don’t believe the fact that the stock market is a bad preditor of recessions. The sparring with the FED implies that the FED has a communications problem 2/n
Centrak Banks are pressed to talk perhaps too much in a culture dominated by the media. Makes it more difficult to be always consistent and any misperception moves market. How different are rates “far from neutral” or “close to the lower range of neutral”? More important ...3/n
It’s difficult to communicate data dependency and publish at the same time predictions of future higher rates. Yes, the predictions are conditional and are not commitments but for humans, number announcements prevail. The FED should get rid of the dots. They are not useful. 3/3
