Tuesday , April 20 2021
Home / Mish's Global Economic / The Fed Soothes the Market Today With More Easy Money Talk

The Fed Soothes the Market Today With More Easy Money Talk

Summary:
“The economy is a long way from our employment and inflation goals,” Mr. Powell said in testimony to the Senate Banking Committee, a statement he has repeated in recent weeks. The Fed will therefore continue to support the economy with near-zero interest rates and large-scale asset purchases until “substantial further progress has been made,” a standard that Mr. Powell said “is likely to take some time” to achieve.Noting that asset bubbles triggered recessions in 2001 and 2007-09, Sen. Pat Toomey (R., Pa.), the top Republican on the panel, asked Mr. Powell if he sees a link between elevated asset prices and the Fed’s easy-money policies. “There’s certainly a link,” Mr. Powell said. “I would say, though, that if you look at what markets are looking at, it’s a reopening economy with

Topics:
Mike Shedlock considers the following as important:

This could be interesting, too:

Mike Shedlock writes The UK Considers a New Central Bank Digital Currency, What Happens to Cash?

Mike Shedlock writes An Amusing Look at Brexit Scare Stories vs What Actually Happened

Mike Shedlock writes “Give It to Me Straight, Doc” Bill Maher Blasts the Leftist Media on Covid-19 Propaganda

Mike Shedlock writes A Welcome Thaw in Nuclear Talks With Iran Now Includes Saudi Arabia

“The economy is a long way from our employment and inflation goals,” Mr. Powell said in testimony to the Senate Banking Committee, a statement he has repeated in recent weeks. The Fed will therefore continue to support the economy with near-zero interest rates and large-scale asset purchases until “substantial further progress has been made,” a standard that Mr. Powell said “is likely to take some time” to achieve.

Noting that asset bubbles triggered recessions in 2001 and 2007-09, Sen. Pat Toomey (R., Pa.), the top Republican on the panel, asked Mr. Powell if he sees a link between elevated asset prices and the Fed’s easy-money policies.

“There’s certainly a link,” Mr. Powell said. “I would say, though, that if you look at what markets are looking at, it’s a reopening economy with vaccination, it’s fiscal stimulus, it’s highly accommodative monetary policy, it’s savings accumulated on people’s balance sheets, it’s expectations of much higher corporate profits…So there are many factors that are contributing.”

For the technically minded, these gap downs and recoveries are more than a bit troubling.

If the housing and the stock market bubbles break simultaneously, the Fed will have an enormous problem.

Watch junk bonds. I expect them to break first. 

Mike Shedlock
Mike Shedlock (Mish) is a registered investment advisor representative for SitkaPacific Capital Management (http://www.sitkapacific.com/). Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.