Lael, a “courier pigeon”?

Last month, John Williams wrote an “out-of-the-mainstream” letter. He was quickly reined in and three days later “toed the line”.

Now, we are told that Lael Brainard will give a speech in Chicago on September 12:

One of the most influential Fed doves has announced that she will speak on Monday, Sept 12 on the US economy in Chicago at noon local time (1 pm ET).

The location is the Chicago Council on Global Affairs and they say she will discuss “the economic outlook for the United States and monetary policy implications” and will be in conversation with Michael Moskow, who was CEO of the Chicago Fed.

Maybe it’s been in the works for a while, maybe she’s been dispatched to reel in hike expectations for September 21. Either way, that’s going to be a critical speech.

The fact that she´s regarded as an “influential dove” increases the “likelyhood” of a September hike if she so indicates. It will certainly be interesting to read.

4 thoughts on “Lael, a “courier pigeon”?

  1. I want to put a conditional projection on the record. IF the Fed raises IOR and the Fed funds rate by 25 bps at that meeting, then the 10 year Treasury will dip below 1.00% within 30 days of that meeting. For our sake, I hope they don’t hike.

    • Me too! But, as I was telling some friends just now, the MP framework in place is “rate normalization”. That´s why they keep saying that they have reached their goals (“full employment” and are just shy of the 2% target). So they worry about not having their instrument (the FF rate) available when the next recession (which is “God-given”) comes along! Better get it up now, so they can lower it when disaster strikes!

      • I agree that this is how they see it. But even on their own terms, they are just wrong. We’ve added something like 2 million jobs over the past 12 months but the unemployment rate only fell 2 tenths of a percent. And the labor force participation rate could potentially still hold like 3 points of slack – we won’t know unless they test it. The NAIRU concept has some problems but if they insist on using it, then they need to test it until inflation exceeds 2%. And with YOY wage growth of 2.4%, we will never get there.

  2. Egads. With real GDP and PCE trending towards the sub-1% zone, then it is a “dove” who wants a more-expansionary monetary policy.

    Milton Friedman in 1992 bashed the Fed for being too tight when the CPI was near 3% and and the Fed had just cut the fed funds from 10% to 3%.

    Today a “dove” is anyone trying to avoid the quicksand of a ZLB perma-recession.

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