NY Fed's Williams says the Fed is talking about talking tapering

Author: Eamonn Sheridan | Category: Central Banks

President of the New York Federal Reserve branch and a permanent voter on the FOMC. 

  • Says the Fed is talking about talking about slowing QE purchases
  • Following the FOMC meeting, there was no minor taper tantrum

Comments are prompting a minor risk currency response, a few bids disappating. Nothing dramatic at this stage though. 

If you are using a retail FX broker provided charting service you may have noticed an outsized bar - this is because retail chart services tend to rely on the 'bid' for the price input, so if bids are lowered the bar can extend in range. If this is new news to you that's OK, we all have to begin somewhere. There are key differences between FX (at a retail level and at the professional, or wholesale, level) and exchange-traded financial market products (such as futures and options, for example; there are plenty of other examples) - in exchange-traded product charting the bars/candles (or whatever) are based on actual trades, real traded prices ... in FX this is not the case as its a decentralised market with no central exchange (tautology there!) and NO ONE has all the details of all trades (no-one ... anyone telling you different is a very misinformed chap indeed).  

Back to Mr. W ... Headlines via Reuters:

  • he would not describe the market reaction to last week's fed meeting as a taper tantrum
  • there are risks to both sides of the Fed's employment and price stability goals and the outlook is still uncertain

  • fed chose not to have a formula for average inflation targeting
  • core principle of fed's approach is that inflation expectations should be anchored at 2%
  • there are upside risks to inflation, which has come in stronger than people expected
  • there is a good understanding of the fed's framework and the understanding that some inflation overshoot is part of the goal
  • labor market is matching workers at a really good clip and wages are picking up
  • there is a tight labor market in the short run because we're in this extraordinary period of churn
  • most important thing is watching the data and seeing how things play out in terms of employment gains and inflation
  • expects the economy to continue to grow nicely in the next couple of years, unemployment to continue to come down and inflation to come out close to 2%
  • overnight reverse repo facility is working exactly as designed in terms of providing a floor to interest rates
  • he is not concerned about high usage of overnight reverse repo facility or if it should continue to increase
  • FOMC has the tools to make sure that interest rates are within the target range
  • fed's adjustments to administered rates were about keeping the fed funds rate within the target range because the downward pressure on short-term rates is growing
  • money market funds have come under distress in the past and should have the attention of regulators

Williams explaining how he was mugged in NY and his tie stolen.

fed williams and powell

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