Fed Chairman Jay Powell Blinked
Fed Chairman Jay Powell blinked. Months into being lampooned by President Trump for making bad monetary-policy calls, the most influential central banker on the planet suddenly – and unexpectedly – tapped the breaks. For the record, I don’t think his departure has anything to do with the president’s arm-twisting, and everything to do with the bleak economic conditions & growth prospects in China. As a bond trader for 20 years, I never heard a Fed chief cite China so singularly or repeatedly in a major policy statement like Mr. Powell did today. He mentioned Apple’s woes explicitly. This is like a page from the old “What’s good for General Motors is good for America” playbook. Mr. Powell said the Fed would remain “patient”, was not on a “preset path”, and went out of his way to praise uber-dove Janet Yellen, his predecessor, for abruptly reversing course & keeping rates artificially low in 2016 when economic conditions worsened. In terms of central-bank word-smithing subtlety, this is like getting punched in the face by Floyd Mayweather. No rate hikes in 2019 is the expectation now – after the Fed raised rates last month. That’s a sharp turnaround for a staid body which usually telegraphs every move months in advance. Whipsawed is one way to describe trader sentiment these days.