We Don't Seek or Welcome
Gregory (Greg) Faranello, CFA
Head of US Rates: Trading, Strategy, and Economics | LinkedIn Top Voice
August 23, 2024
Good morning, everyone. The Chairman delivers a solid and concise speech. And offering perspective. The "good ship transitory". That was funny. The view of beginning to lower rates was largely expected. But he overrode any Fed speak or thoughts otherwise. The rate of change has come down (inflation). Overall prices remain very high. It's all about jobs. We knew that but got clarification.?
Let's Take a Look:?
Our three takeaways from Chair Powell's speech:?
1) We don't seek or welcome further labor weakness. The Fed made a pivot to the employment market several months ago. Chair Powell made it perfectly clear. It highlights the employment release on September 6th. And the newer, lower rate structure reflects. Markets can't rule out 50-basis points to begin.?
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2) Inflation Expectations.?The architect of the Fed policy in 2022 was former St. Louis Fed President Bullard (Clips of 75). Inflation expectations come in various forms, market-based and surveys. Market-based inflation expectations in the US Treasury market project a good deal of success from this Fed. This is not the Seventies. A lot of credit to Chair Powell's Fed. ??
3) Limits to our Knowledge.?Humility. Chair Powell ended well. In our view a combination of global dynamics and the domestic desire to continue spending. We're all human. The benefit to intentions. I live by studying and using intuition. Let's see what the Fed's new framework brings. But changes are coming, and an open mindset should be welcomed from the Fed Chair.??
On the Ground
A solid speech from Chair Powell. In fairness his job wasn't easy. But when the government takes out a bazooka to spend why stoke it? That's what happened in 2021. We can't afford that mistake again. This inflation domestically was partly supply chain. But mainly domestic spending in the end. And it seems likely there's plenty more coming. Stay tuned.?
Heading out for my first days off 2024. It's been a beast and I've been doing this a long time. Getting my daughter back to Villanova and hitting the beaches of Long Island. See u after Labor day. September is going to rock as the Chairman set a good stage as we look toward the November election.?
Have a great week ahead and Labor Day!?