Fed holds rates steady but with highest level of dissent since 1992
... In what may have been Chair Jerome Powell’s final meeting at the helm, the rate-setting Federal Open Market Committee voted to hold the benchmark funds rate in a range between 3.5%-3.75%. Markets had been pricing in a 100% chance of no change. ...
It wasn't much of a dissent when the vote to hold rates steady was 11-1. Three of the eleven simply disagreed that right now the Fed should say as it does in the official statement that it remains open to new information which might suggest additional rate cuts in the future, when in their opinion that sends the wrong signal when inflation remains as elevated as it is at present.
... “My decisions on these matters will continue to be guided entirely by what I believe is in the best interest of the institution and the people we serve after my term as chair ends on May 15, and will continue to serve as a governor for a period of time to be determined,” he added. ...
Stock investors fared very well under Powell. Bond investors, not so much
... the S&P 500 rallied 14.7% annually under Powell, the third best performance for Fed chairs going back to 1970, Bespoke Investment Group found. ...
“He believed in easy money. He voted for all the QEs. He voted for zero interest rates,” Boockvar said. “It’s only when inflation mugged him ... that he became more hawkish ... .”
But the problem with accommodative monetary policy is, “Easy money gets investors drunk on things, and puts beer goggles on them,” Boockvar said. ’Sometimes it ends up OK, but other times it ends up in rampant inflation.”
... The Bloomberg US Aggregate Bond Index that aims to track all U.S. investment-grade debt returned just under 2% annually during Powell’s tenure, far below the average of 6.5% since the 1970s, according to Bespoke. ...
Analysis: The Warsh revolution is coming. Powell won’t stand in the way.
... the only major challenge for Warsh, as far as Powell is concerned, will be driving consensus within the Fed for where to set interest rates. Wednesday’s dissents suggest that won’t be easy. But Powell, whom Warsh has described as a failed chair who chose inflation, went out of his way to say Warsh is up to the task.
The chair’s job is to “create consensus” among the Fed’s voters and to “be inside their thinking,” Powell said.
Warsh “has the capabilities, skills to be very good at that,” Powell said.
If Warsh cuts interest rates in this environment, he'll be choosing inflation, too.
Inflation is very painful for the people, but for a government which absolutely refuses to get its fiscal house in order Powell's choice of inflation was the only medicine available to him, faced as he was with a national debt snowballing toward $40 trillion and the moon after that, and desperately in need of devaluation.
