Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

  • About Us
    • Contributors
    • Archives
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Dynamic Maximizers®
  • Retirement Compounders®
  • Free Email Signup
  • Dick Young’s Safe America

How Far will the Fed Push Markets to Get 2% Inflation?

May 8, 2019 By Jeremy Jones, CFA

Chair Powell presents the Monetary Policy Report to the Senate Committee on Banking, Housing, and Urban Affairs. February 26, 2019. Photo courtesy of the Federal Reserve.

The latest parlor game in economics has become guessing how far the Fed will go reach its goal of 2% inflation. Is it worth upending the entire economy and markets to simply boost inflation by a couple dozen basis points?

One would imagine that monkeying around with the foundation of a $19 trillion economy in order to boost the reading on a somewhat unreliable measure of price inflation would be a bad way to set policy. That hasn’t seemed to occur to many of the PhDs at the Federal Reserve though.

Bloomberg’s Craig Torres reports on the Fed’s decision making:

Economists expect the Fed to ignore market froth, leaving the policy rate on on hold in a range of 2.25 percent to 2.5 percent at the conclusion of their meeting Wednesday, while expressing concern over “muted” inflation. It’s a tricky subject for the Fed to navigate without sending mixed signals to the markets.

New York Fed President John Williams, prior to the rate hike in December, said an increase had the “added benefit’’ of reducing financial imbalances. As stocks plunged after the move, Williams said the Fed is “listening very carefully to what’s happening in markets.’’

Fed officials discuss financial stability risks at most policy meetings. The Fed Board in Washington even publishes a semiannual report focused specifically on financial risks. But the committee’s communication on the topic can appear confusing and contradictory.

Minutes from the March 19-20 FOMC meeting show “a few” officials worried about growing financial stability risks and a couple pushed to trigger a requirement for big banks to build bigger capital buffers to guard against a downturn. Yet earlier that month the Board voted 4-1 not to do so, with Governor Lael Brainard dissenting.

“How much froth in leveraged lending is the Fed willing to tolerate in exchange for 20 basis points on inflation?,’’ Coronado asked a New York Fed advisory panel earlier this month.

Fed Chairman Jerome Powell will likely face similar questions at his post-meeting press conference Wednesday. He told reporters last month that the linkage between monetary policy and financial stability is an “unsettled and difficult” question and the first option is regulation and supervision.

Fed officials are asking, “‘What is the alternative, what can we do?’’’ said Seth Carpenter, a former adviser to the Fed Board who is now chief U.S. economist at UBS Securities LLC.

“Greenspan’s answer was, ‘Well that is just capitalism,’ and that didn’t turn out very well,’’ he said, referring to former Fed chief Alan Greenspan.

Read more here.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • This is why Calm Markets Should Worry You
  • Trump Pries Open China’s Financial Markets
  • This is What Terrorizes the Fed
  • Author
  • Recent Posts
Jeremy Jones, CFA
Jeremy Jones, CFA, CFP® is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. Richard C. Young & Co., Ltd. was ranked #10 in CNBC's 2019 Financial Advisor Top 100. Jeremy is also a contributing editor of youngresearch.com.
Latest posts by Jeremy Jones, CFA (see all)
  • What Is the Stock Market’s Link to the Economy? - January 20, 2021
  • Whether Through Audacity or Ignorance, Stock Fundamentals Are Being Ignored - January 19, 2021
  • Jim Simons’s Renaissance Technologies vs. Internet Forum Traders - January 15, 2021

Search Young Research

Most Popular

  • The Fed is Sacrificing Retirees to Save the Banks
  • Dick Young’s Safe America: Chapter 1, Part I
  • Vanguard Wellesley (VWINX) vs. Wellington (VWELX): Which Fund is Best?
  • Do You Remember When NASDAQ Dropped by 82%?
  • I’ve Been in Richard Young’s Maximizers for Years
  • The Power of a Compound Interest Table
  • The Highest Yielding S&P 500 Stocks
  • Gavekal Chairman: Renewables Bubble is "Stupidest" Ever
  • Don’t Be on Their Radar, Get Out of Debt Now
  • Whether Through Audacity or Ignorance, Stock Fundamentals Are Being Ignored

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Could this Be the Vanguard GNMA Winning Edge?

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

RSS The Latest at Richardcyoung.com

  • This Guy Is America’s New President: Shotgun Joe
  • Progressives Steal White House/Demolish Their Foundation
  • The Route 209 Pennsylvania Presidential Election Mystery.
  • A President Speaks: “Hard Work Never Killed Anybody”
  • Trump Clobbers Biden In Pennsylvania, Day #2
  • VIDEO: Joe Biden, “Buy a Shotgun,” the Remix
  • Pennsylvania – Trump Buries Biden Day #3
  • Biden Seeks to Expand Inefficient and Unsafe Transport of Oil by Rail
  • Shotgun Joe Biden: Crackin’ Up
  • The Recklessness of Arnold Schwarzenegger

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Social Media

  • Facebook
  • Twitter
  • Youtube
  • Pinterest

Copyright © 2021 | Terms & Conditions

loading Cancel
Post was not sent - check your email addresses!
Email check failed, please try again
Sorry, your blog cannot share posts by email.