Press "Enter" to skip to content

A Hawkish Nothingburger

To call Jay Powell’s statement today a “nothingburger” would be beyond accurate.

Jay didn’t want to offend President Trump nor stir the markets because after all, the narrative of everything is awesome is more important than reality.

So before I comment, here is the FOMC statement from the Federal Reserve webpage:

January 29, 2025

Federal Reserve issues FOMC statement

Recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.

In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Translation from Fedspeak into English:

We don’t have a clue.

The bond market was flat-tish, the stock market was, in the technical term, ‘meh’ on lighter volume, and the Japanese Yen which is the Fed risk currency to watch was still trading in a very tight range as none of the central banks, again, know what to do.

To sum up this author’s take on this:

Be scared, be very scared because they can not set the policy they want with lower rates due to the real rate of inflation and fear of the bond vigilantes nor can they increase rates due to the current President of the United States who appears prepared to go to war with not only the US Dollar, but the Fed itself.

Now compare today’s statement to the first statement after Donald Trump was “unofficially” elected President from the FOMC meeting on November 8, 2018:

November 08, 2018

Federal Reserve issues FOMC statement

Information received since the Federal Open Market Committee met in September indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has declined. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 2 to 2-1/4 percent.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Notice any dramatic differences? Nope. But what the Federal Reserve under newly selected Chair Jay Powell did seven years ago was play the “we got this” strategy with the economic and political elites while the election information and policy evaluation was under way. That policy was not sufficient to avoid an almost complete meltdown of America’s banking system right before Christmas of 2018 and will not work in this era either.

Unfortunately for Chair Powell then, as now, there is a great degree of economic instability that is not being acknowledged nor properly being responded to as an aversion to proactive action has been the hallmark of his reign.

Prepare for the warning this author has been discussing since the last week of 2024:

Instability breeds instability.

This Federal reserve is not prepared nor is America’s financial system.

Views: 79

Article Sharing:
Mission News Theme by Compete Themes.