Is the Fed Delusional or a Big Pack of Liars?

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by Mish Shedlock, The Street:

Let’s discuss Fed Chair Jerome Powell’s press conference following the January FOMC rate hike meeting.

Despite Raging Inflation, the Fed Stands Pat in Wimpiest Statement Ever    

Earlier today I commented Despite Raging Inflation, the Fed Stands Pat in Wimpiest Statement Ever

Asymmetric Policy

For starters, the Fed is hiding behind Covid. It continues its amazingly asymmetric policy of being hyperactive after bubbles pop but being extremely accommodative until they do pop.

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Asymmetric Policy

For starters, the Fed is hiding behind Covid. It continues its amazingly asymmetric policy of being hyperactive after bubbles pop but being extremely accommodative until they do pop.

Inflation Thumb Twiddling

Inflation has been raging for well over a year and all the Fed does is admit “Overall financial conditions remain accommodative,” with a pledge to “monitor the implications.

Press Conference Equally Wimpy

The YouTube video begins at the 53 minute mark. Before that, it’s blank. At the 53 minute mark Powell speaks. At the 1:00:50 minute mark, Powell entertains a Q&A.

Powell: It will soon be appropriate to raise the Federal Funds target rate. …. Reducing our balance sheet will occur after the process of raising interest rates has begun.

Mish: Inflation suggests it was appropriate a year ago. At the very least, expanding the balance sheet now is ridiculous. Yet the Fed will still expand through March 2022. The Fed made similar statements a year or so ago, and thus committed to let inflation burn higher regardless of what happened in the interim.

Powell: Reductions will occur over time in a predictable manner. primarily through adjustments to reinvestments so that securities will roll off our balance sheet. … The Committee has not made decisions regarding specific timing, pace or other details of shrinking the balance sheet. We will discuss these matters in upcoming meetings and provide additional information at the appropriate time.

Mish: This implies a very slow balance sheet reduction. In practice, it’s highly likely the next recession hits before the Fed gets seriously underway with balance sheet reduction.

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