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10 Jan, 4 tweets, 2 min read
Several former Fed officials have commentaries today that all say the same thing.

Here's Larry Meyer: "Yes, the FOMC is behind the curve. A dangerous place to be, especially if the FOMC is very far behind the curve, as I believe is the case today."

1/
Former NY Fed President Bill Dudley says the central bank's latest economic projections amount to a dovish "fantasy" that inflation can return to 2% with rates gently rising up to 2% over the same three year timeframe

2/bloomberg.com/opinion/articl…
Dudley says the Fed may need to raise rates more than four times in a year.

"They're going to go fairly slow at first.... It wouldn't surprise me at all if we get into an every meeting kind of cycle at some point."

3/
Former Fed governor Frederic Mishkin says the central bank misjudged demand last year, was too quick to write-off the Phillips curve, and executed their new framework poorly

4/4 ft.com/content/f14f14…

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More from @NickTimiraos

Nick Timiraos Profile picture
11 Jan
Atlanta Fed President Raphael Bostic said the central bank should be aggressive in shrinking its balance sheet, allowing its holdings to decline by at least $100 billion a month reuters.com/business/feds-…
What Bostic is talking about here is allowing some but not all of the Fed's security holdings to mature without reinvesting principal every month.

In Oct '17, the Fed started by allowing $10 billion in securities to mature every month ($6B for Treasurys, $4B for MBS)
These amounts rose every quarter, so that by Oct '18, the Fed allowed $50 billion in securities to mature every month (Trump referred to this as the "50B's"). That was divided between $30 billion for Treasurys and $20 billion for MBS.
Read 5 tweets
Nick Timiraos Profile picture
7 Jan
All signs are pointing to the Fed raising interest rates in March after another jobs report that shows an ever-tighter labor market wsj.com/articles/jobs-…
To understand how the Fed will react to this report, it is best to not pay much attention to the supposedly underwhelming payroll print. Those have been revised higher in recent months.
Instead, look at signs of labor market tightness via the:

• rising prime-age employment rate (it has jumped a full percentage point, from 78% to 79%, since August),
• a falling unemployment rate (U-6 is at 7.3%, just three tenths above Feb 2020 level),
• and rising wages.
Read 4 tweets
Nick Timiraos Profile picture
16 Nov 21
Sherrod Brown says he's "absolutely certain" either Jay Powell or Lael Brainard could be confirmed as Fed chair.

They're both "clearly qualified."

Decision could be announced "in the next several days or couple of weeks."

h/t @aduehren
Sherron Brown won't reveal his preference except to say he does have one and has shared it with Biden.

"I don't have a read on what they're going to do. They have put a lot of thought into this. They've put a lot of thought into the other openings."
Brown says "they may do one or two" other Fed appointments "with the chair. It's not clear."
Read 5 tweets
Nick Timiraos Profile picture
15 Nov 21
One question I’m getting a lot is how a Brainard Fed would be different from a Powell Fed on rate policy? We laid some of that out in this story today. I’ll elaborate in this thread.
The short answer: They've stated similar views on inflation and policy wsj.com/articles/biden…
But because policy could be nearing an inflection point and because no one at the Fed has had to deal with a problem like the current one, there’s perhaps less certainty about the Powell reaction function or the Brainard reaction function, and any differences therein.
(Note: This isn’t intended as a commentary on the political horserace, I.E., who's up or who's down, which doesn’t feel like it has changed all that much since the summer)
Read 15 tweets
Nick Timiraos Profile picture
3 Nov 21
Powell is really underscoring the uncertainty associated with policymaking today. "We have to be humble about what we know about this economy." We thought the economy was heading to one destination until Delta came along.
Powell: We thought schools reopening and elapsing unemployment benefits would boost labor supply. That wasn't the case.

The learning for those of us who lived through the last cycle, over time, maximum employment can be somewhere different than anticipated.
Powell: It is very possible that the Fed has already met its inflation test for liftoff. The inflation language in the forward guidance might be a little stale.
Read 8 tweets
Nick Timiraos Profile picture
1 Nov 21
This week’s Fed meeting—and Powell’s press conference on Wednesday—is a higher stakes event than seemed likely a few weeks ago after markets reacted to potentially hawkish shifts by central banks in Canada, the U.K., and Australia wsj.com/articles/centr…
The Reserve Bank of Australia stunned investors when it declined last week to defend the 0.1% target on bond yields that mature in Apr ‘24, fueling expectations that it will scrap yield curve control at Tuesday’s meeting. “If so, this is a startling about-face,” said one analyst
The Bank of Canada surprised markets last week when it ended its government-bond-purchase program and moved up the time frame for when it might first raise its benchmark interest rate from its current near-zero level.
Read 5 tweets

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