European Central Bank President Mario Draghi is worried. So is Federal Reserve Governor Lael Brainard, as well as former Federal Reserve Chairwoman Janet Yellen.
In Washington, Draghi said he was worried about central bank independence in other countries, especially “in the most important jurisdiction in the world.”Brainard said the central bank favors “fact-based intellectually coherent arguments that are based on evidence, that are consistent over time,” words intended to draw focus on Moore’s and Cain’s switch from favoring higher interest rates when unemployment was high, to now calling for lower interest rates with unemployment low.
Inflation expectations, as derived from 5-year Treasury- TMUBMUSD05Y, +1.22% and inflation-protected securities, stood at 2%, which is right at the Fed’s target and lower than the 2.3% rate it was at during the autumn. But Robin Brooks, chief economist at the Institute of International Finance, says the recent strength of the dollar versus emerging-market countries is a puzzle since the Fed has engineered a very well publicized about-face, both on the need for further rate hikes and on bond buying. In a tweet, he said the feedback he has received indicates that the weakness in emerging-market currencies is a sign that investor confidence in the Fed has taken a hit.
Another sign, perhaps, of deteriorating confidence in the Fed is a rising risk premium — the difference in the yield on the 30-year TMUBMUSD30Y, +0.73% and the 10-year Treasury TMUBMUSD10Y, +1.49% securities is growing, rising to a nearly 18-month high.
The FED is the greatest enemy of free markets and real capitalism. Needs to be abolished!
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