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Watch Powell Trying To Explain Inflation Will Be Transitory

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EDITOR NOTE: Anybody who’s worked for a large institution and has experienced the burden of addressing a board or the general public is probably familiar with these two words: talking points. Talking points often foreground x to divert attention from y. You don’t deviate from the talking points; certainly, you don’t contradict any of them; and if someone challenges a critical point, you have to be adept at spinning the message, emphasizing the positives in a manner that dwarfs the negatives. The article below is a hypothetical set of talking points for Fed chair Jerome Powell. Given the consistency of his messaging, the talking points are easy to reconstruct. The questions that follow are also easy to assemble, as the “negative space”--what’s not being addressed--is louder than the positive space. The idea of inflation being “transitory” and the Fed in “control” constitute the positive space. Everything else that challenges or casts doubt on those two ideas constitute the negative space; what’s not being addressed, the key factors from which the public’s eyes and ears are being diverted; the only things that really count--the Fed’s Achilles heel, or the emperor’s clothes. 

"Steady as she goes..." was the plan. Goldilocks is the message...

Don't over-emphasize the gains in the labor market or the vaccination trajectory...

Don't mention record high valuations...

Don't deviate from "transitory" explanations for soaring/record commodity prices...

Don't suggest you're thinking about thinking about thinking about yield curve control...

Do not  - under any circumstances - suggest a taper is 'on the table'... make it clear it's not even in the buildingl.

And don't whatever you do, feed them after midnight...

Given that relative nothing-burger statement, here are some topics to listen for during the press conference (via Bloomberg):

      • How does the Fed view the disconnect between the market, which is showing rate hikes expected to come as early as 2022, and the Fed’s own forecasts, which suggest a move isn’t likely before 2024?

      • What kind of downside risks to the U.S. economy does the Fed see from the resurgence of the coronavirus around the world, especially in places like India and Brazil?

      • How much improvement does the Fed want to see in labor-market indicators for historically disadvantaged groups, like the Black unemployment rate, before it begins raising rates?

      • What does the Fed mean by “transitory” -- how long would inflation have to run above its 2% target before it reconsiders that assessment?

    Remember, Bond King Jeff Gundlach thinks The Fed's confidence in inflation being transitory is completely misplaced...

    "...more importantly, I'm not sure why they think they know it's transitory... how do they know that?"

    The Fed is "trying to paint the picture" of control, but Gundlach tries to make clear: "they're guessing."

    So Powell has two options (h/t @AlessioUrban):

    Can Powell navigate another press conference without saying anything of note at all?

Original post from ZeroHedge

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