All Eyes on Fed Chairs Panel Today - SocGen
Kit Juckes, Research Analyst at Societe Generale, suggests that the big
event today is the first and perhaps only panel featuring the four past
(and present) Fed Chairs.
“What is striking is that in order to defeat 1970s inflation, Paul Volcker had to get Fed Funds to average significantly more than nominal GDP growth, for a significant period of time. When that battle was won, Fed Funds and nominal GDP didn’t deviate by far, except for the occasions (93, 99, 03/07) when policy lagged growth and fuelled asset bubbles.
Now, after the biggest of those has exploded, Janet Yellen is left keeping rates super-low in order to fight disinflation, in a striking contrast to the fight waged by Mr Vocker’s FOMC. The biggest difference though, is that while money supply targeting gave Mr. Volcker a framework for that fight (and for us to understand it), we now have rules-free policy setting. Hence, legions of confused economists and a market which watches the Fed while the Fed watches the markets.”
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