On Wednesday, Federal Reserve Chairman Jay Powell spoke at the Economic Club of New York. Firstly, the Fed Chair stressed that the Federal Reserve, counter to much media speculation, will remain patiently accommodative. He noted that transient inflationary forces likely to accompany an economic normalization would be very unlikely to affect monetary policy. He stressed that the labor market's damage is far worse than the headline unemployment rate would indicate and said the ‘real’ rate is about 4% higher at 10%. He also mentioned that we had seen the largest decline in labor force participation since shortly after World War II.

One thing is clear; the Fed is more focused on unemployment rates coming down and the more equal gains that correspondingly occur across the economy, then adhering to the more 'hawkish' approach of preliminarily raising to cool an overheating economy. This is theorized to curtail the length and severity of asset bubbles, but Powell has recently questioned this logic. He is full-speed ahead on monetary accommodation and will let inflation run high. Tapering will not be occurring any time soon though.

Markets appeared to get the message pretty clearly this time. The yield on the 2 -year treasury briefly touched levels below .1% before finding sup...

Unlock this article with a FREE 30-Day Trial!

An FSI Pro, or FSI Macro subscription is required in order to access this content.

*Free trial available only on a monthly plan

Disclosures (show)

Get invaluable analysis of the market and stocks. Cancel at any time. Start Free Trial

Articles Read 2/2

🎁 Unlock 1 extra article by joining our Community!

You’ve reached your limit of 2 free monthly articles. Please enter your email to unlock 1 more articles.

Already have an account? Sign In

Want to receive Regular Market Updates to your Inbox?

I am your default error :)