In an attempt to rein in too-hot inflation, the Fed has tried to signal to investors and the financial markets its plans for tackling rapid price growth. In order for monetary policy and interest-rate hikes to work, the markets have to clearly grasp the Fed's goals and fall in line with those objectives.
Other times, this signaling hasn't gone as well. When the Fed began hiking rates in 2004, private-sector debt costs actually got looser. From June 2004 to September 2005, both corporate bond yields and mortgage rates fell about half a percentage point while the Fed's main interest rate increased to 3.75% from 1%. The markets failed to get the picture, and as a result, the Fed's efforts to slow the economy and make the 2000s expansion more sustainable were a failure.
These flip-flops have caused chaos for markets. Stock prices plunged after the mid-June meeting but soared after the subsequent meeting seemed to signal that the most intense rate hikes were over. The yield difference between risky and low-risk bonds also collapsed. That sounds like good news, but it actually represents a breakdown in the way monetary policy is transmitted to the rest of the economy.
The good news is that the bond market is confident the FOMC will succeed in bringing down inflation, and surveys of consumers and businesses suggest inflation expectations have dropped with gas prices over the past few months. The Fed is credible in the long run, but the FOMC is making its own life much harder by changing its script.There is one clear lesson for the FOMC from this summer: Communications are not working correctly.
Raising costs via higher interest rates and expecting prices to come down? Needs to take the course commonsense 101. Insanity is doing the same thing repeatedly yet expecting different results
JeromePowell, a tump appointee, lowered interest rates when they did not need to be lowered to help trump's re-election chances, artificially injecting trillions into the economy, and now JoeBiden is paying with ultra high interest rates. Fire Powell. federalreserve
And he and yelled still have jobs amazing if I screwed up that bad I would not have a job
Jerome Powell speaks and the stock market crashes. Thanks Mr. Chairman!
We are so blessed to have Jerome Powell at the helm. He is a consummate professional. There is no better person for this position today.
He does not speak doof and until he does no one will understand him or his data that could be bought and paid for by corporations as an example he called rent gouging housing costs as [shelter inflation] Hello ,say it SHELTER INFLATION Is he MARIE ANTOINETTE LET THEM EAT CAKE
Inflation needs to be quashed and it needs to be done as soon as possible. The stock market is not important to the economy and most of the people hurting could care less what the markets do.
The Global Agenda Requires That... Confusion
Democrats destroying American economy
Agree
They’ll raise rates again and throw the country into a prolonged recession lasting three + years. Then the next Fed chair will recapitulate and say they were too aggressive with the rate hikes. They should do nothing and let the rate increases marinate in the economy for a while.
Its not confusing, it just wealthy ppl losing money, after enjoyed so much wealth created by fed during decade long of loose monetary policy.