Did the Fed cave into the falling stock prices? And did that flip flop set the market up for further pain?
When Jerome Powell took over as the head of the Federal Reserve two years ago, he made several things abundantly clear; he thought prior monetary policy had been too easy for too long and was determined to normalize rates. He wanted to draw down the balance sheet, he would front run any possibility of letting inflation pressures build, and most importantly, he would let the whims or whines of the stock market (or the President) deter him from accomplishing those goals.
But as Mike Tyson famously said, “Everyone has a plan until they get punched in the face.” And that punch, which came in the form of a 20% decline and stocks and multiple tweets from President Trump, landed in December forcing Powell to throw up his hands and retreat to a more accommodative corner.
Powell’s pacific posture took form during the Dec 18 FOMC meeting when he acknowledged softer economic data would cause him to more data dependent in terms of the path of rate hikes.
The bigger the backtrack was… Continue reading at StockNews.com