INSUBCONTINENT EXCLUSIVE:
on its dual mandate of maximum employment and stable prices
They remain as important and influential
What has changed is their impact on volatility
Rather than help counter and contain unsettling market moves, many now worry Fed has been fueling them and, with that, inadvertently
contributing to a market selloff that could undermine economic growth and longer-term financial stability.
There is a long list of people
including top hedge fund managers
As an example, shortly after Federal Open Market Committee policy meeting in December, New York Fed President John Williams had to clarify
what Powell had stated at a news conference just two days earlier.
When he speaks at annual meeting of American Economic Association on
To do so, he could consider a three-point message to markets and politicians.
First, that United States economy remains solid, underpinned
by strong job creation and wage growth, which should be confirmed by monthly jobs report for December that will be released before his panel
appearance; but balance of risk has undoubtedly shifted more to downside, as weaker-than-anticipated ISM numbers on Thursday made clear
Second, that Fed is sensitive to possibility of spillovers from volatile markets contaminating health of United States economy, and to
potential spillbacks from economic weakness internationally
words are meant to be influential, and when they are an integral part of your brand, there are few things worse than losing control of your
Through appropriately crafted messages in these three areas, Fed has an opportunity to address this problem.
Success would be part of a
process, not instantaneous
volatility to contributors
Nor will it change other inconvenient reality for central banks that they find themselves in this position largely due to factors beyond
But success would help reduce risk of a policy mistake, especially one that could be forced on Fed by words and actions of others.
