Well, Jerome Powell’s pandemic honeymoon period appears to be over. His address at the WSJ Forum was followed by significant market carnage. It’s not like he did or said anything blatantly wrong; he didn’t. Sometimes though, the role of a Fed Chairman is quite thankless. The adoring crowd can quickly turn into a hostile and demanding one. By and large he completely stuck to the common script. He took the position that any increases in inflation that we would see would most likely be transitory and that he expected the Fed to essentially ignore them. The Fed is still not even ‘thinking about thinking’ raising rates or curtailing asset purchases according to Powell and his deputies.

Rates spiked in the wake of Powell’s remarks which apparently weren’t dovish enough. Despite the turmoil in equity and spike in yields yesterday many indicators of financial stability the Fed pays closest attention to like risk premiums on corporates are still in great shape.

We spoke with some experts yesterday who believed by opening up a ‘crack’ in the Fed’s current dovish stance by indicating it could be altered by incoming data increased existing anxieties. Essentially, this means their response could be forced by bond market participants. We expect the Fed might work to ...

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