Fed's Williams: It is better to take a preventative approach than to wait for disaster
Fed's WIlliams speaks on monetary policy
- it is better to take preventative measures on rates than to wait for disaster to unfold
- research shows that when a neutral rates are low you should not keep your powder dry
- policymakers must move more quickly to vaccinate the economy and add monetary stimulus when rates are close to 0
- when rates are near 0 policymakers cannot afford to take a wait and see approach
- lower for longer rates foster good financial conditions, allows stimulus to pick up steam, allows inflation to rise
- promising temporarily higher inflation after rates touch 0 can offset nearly all negative effects of low rates
- if inflation gets stuck below the goal, people's expectations may push inflation lower, reducing Fed's ability to be effective
- long-term forces lowering neutral rates set to linger
- investors see low-inflation readings as a new normal
- Williams currently estimates neutral rates in US around 0.5%
Dovish comments from the Fed Vice Chair. The EURUSD has moved to NY session highs. The GBPUSD is trading at a new session high and is back above the 200 hour MA and looks toward the 1.2500 level. The USDJPY is approaching their lows for the day (new NY session low).
The S&P index is back in the black and looks toward a test of the high at 2987.26. The index is trading at 2986.98.