Financial Stability Policy Easing Intention Signals Fed “Third Mandate” Capability

“I don’t think it is controversial to say that the last few years have proven particularly challenging for forecasts.”(Tom Barkin)

(Source: FT, caption by Nathan Mayer Rothschild)

Summary:

·       The Fed drifts into the financial stability policymaking “Third Mandate” zone, to escape from the “Prison of Transience” in the Rumsfeld Quadrant.

·       The Fed has, somewhat, mitigated, but not avoided, the fallout from its higher-for-longer monetary policy choice.

·       The “Commentariat” has failed to understand the Fed's “Third Mandate Drift” towards greater balanced governance, and enhanced Congressional mandate performance, through greater accountability.

·       Discounting a successful “Third Mandate Drift” will reduce the current Fed operational risk premium in the US term structure of interest rates.

·       The “Commentariat” understands the 1990s Indian frame of reference, but not the devolution from/ dissolution of the BRICS objective.

Extracts

·       The “CIOgnoscenti” has, so far, missed the key signal that the Fed intends to lead a developed central bank wave of macroprudential policy easing, in lieu of inflation-challenged monetary policy easing.

·       The recently reported poor US bank earnings season signals that it is time for macro-prudential policy easing.

(Source: the Author)

(Source: the Author)

(Source: the Author)

(Source: Bloomberg, caption by the Author)

(Source: the Author)

(Source: Federal Reserve Board, caption by the Author)

(Source: Federal Reserve Board, caption by the Author)

(Source: the Author)

(Source: the Author)

·       Based on the trend, in observed perceptions, Chairman Greenspan is the worst bi-decennial Fed Chair, in recent economic history.

·       Based on volatility, in observed perceptions, Chairman Powell is the worst bi-decennial Fed Chair, in recent economic history, even though he has raised the credible commitment upper confidence limit.

·       Powell’s handling of COVID, and the immediate aftermath, have led to his volatile perceived credibility problem.

·       Current Fed “Third Mandate” drift, towards a financial stability policymaking mandate, has the opportunity to improve perceptions, of Powell, by spreading authority, and accountability, across a perceived more objective, and thereby effective, institutional process.

(Source: the Author)

(Source: Bloomberg, caption, and editing by the Author)

(Source: Richmond Fed, editing by the Author)

(Source: the Author)

·       “Jai Ho!” Morgan “ignites” the “Global Blair Inc. Witch Project” bonfire of the vanities.

·       “Jai Ho’s” inclusion of Indian bonds is intended to exclude India from the BRICs.

(Source: the Author)

(Source: Bloomberg, caption by the Author)

(Source: Bloomberg)

(Source: Bloomberg, caption by the Author)