Comments from the Federal Reserve Vice Chairman
- Yield caps are complicated to implement and communicate
- Yield caps an option if circumstances change markedly
- Change in employment language shows that macro models "have been wrong" and that rate hikes in the absence of inflation are "difficult to justify"
- Full text
The important thing here is to emphasize that the Fed is shifting towards the sidelines and away from doing more. There was a point in the summer when the Fed was indicating that it was only a matter of time before it would do more, now we might get a bit of forward guidance but nothing else.
I worry that the core of the Fed's new policy of higher temporary inflation is the belief they can hike rates to stamp out inflation if it comes. History shows that's a lot more difficult politically than anticipated.
