- The Federal Reserve should focus not on market swings but on making the US economy stronger, supporting the job market, and meeting its inflation target, Minneapolis Fed President Neel Kashkari tells us.
- The impact of the new tax cuts on the economy remains highly uncertain, Kashkari said.
- Market concerns about the economy overheating have no grounding in the data, he adds.
- « I’m not too focused on the stock market’s gyrations. »
Kashkari souhaite que la Fed ne se préoccuppe pas du marché financier.
Nous également nous considérons que ce n’est ni sa mission ni conforme à l’intérêt général. Mais Kashkari parle dans l’absolu car depuis des décennies la Fed se préoccuppe des marchés et veut les faire monter pour créer des effets de richesses.
La question est donc de savoir si on peut changer de politique sans risque . Je dis chiche!
Il est évident que la situation financière est assimilable à une pyramide qui tient sur la pointe grace au bilan de la Fed, à la base-money, aux taux quasi-nuls et surtout grâce aux promesses qui sont en fait des assurances gratuites. Si la Fed changeait de poltique et cessait de se préoccpper des marchés , ce serait la débandade!
Kashkari en fait veut que la Fed néglige les signaux envoyés par les marches.
Les marchés disent attention si les anticipations inflationnistes accélerent , alors les taux longs vont monter et nous les bonds vigilantes, nous vous forceront à faire machine arrière.
Voila le message que Kashkari idéologue ne veut pas entendre. Il veut que la Fed se moque des avertissements des marchés, passe outre et force encore le rythme sur l’emploi pour declencher la vraie spirale des salaires. Je suis pour, mais il faudrait m’expliquer comment on fait face à la tourmente qui va saisir les marchés, les banques, si les voeux de Kashkari se réalisent!
Il est sain de ne pas se focaliser sur les fluctuations du marché mais il est trop atrd, quand vous êtes monté sur les sommets et que les valorisations sontde 2,7 fois les valorisations normales de long terme, vous ne pouvez vous en laver les mains et dire je m’en fous je prefère que l’on pousse les feux des salaires. Car après cela la prochaine étape sera encore plus déflationniste que celle de 2008 car le poids des dettes et du crédit s’est renforcé depuis.
Cet homme est ou un idiot ou un révolutionnaire, il veut le chaos.
Moi aussi mais plus intelligemment.
L’enfer est pavé de bonnes intentions.
« Ignore Wall Street’s wild swings. The best thing the Federal Reserve can do for the economy right now is to make sure the labor market keeps strengthening so workers’ wages will finally rise after years of stagnation, Minneapolis Fed President Neel Kashkari told Business Insider.
« The markets are reacting to the first signs that maybe inflation is finally picking up. But it’s only one data point, right? » he said, referring to an annual 2.9% rise in average hourly earnings for January, the strongest since the recession. It accompanied an employment report showing a solid gain of 200,000 new jobs.
« I, for one, am not overreacting to it, » Kashkari said. « I’m not dismissing it. We need to pay attention to inflation expectations and wages. If wages are finally growing, that’s a net positive for the economy. Certainly, it’s a positive for workers. So I’m not too focused on the stock market’s gyrations. »
Stocks around the world took a dive in the past three days, kickstarted by a plunge in the Dow Jones industrial average Friday. Equity markets, in turn, were reacting to rising bond yields, which for their part were climbing on fears of higher inflation.
Need more data
Yet, as Kashkari often notes, the Fed has been undershooting its 2% inflation target for most of the economic recovery, a trend that reflects, in part, persistent weakness in the labor market despite a 17-year-low unemployment rate of 4.1%.
US economic growth has hovered close to 2% for much of the rebound from the Great Recession, but it has recently crept higher into the 3% range as hopes of a fiscal stimulus from the Republican tax law have goosed corporate earnings. But Kashkari, who dissented against all three of the Fed’s interest-rate hikes in 2017 because he wanted to see greater progress toward the 2% inflation target, remains unconvinced.
« I want to see more data, » he said. « The job report on Friday was encouraging, but it’s one data point — are we actually seeing an uptick in wage growth? Was it a one-time repricing because of minimum-wage increases and some of these bonuses? Or is it something more sustained? And are inflation expectations in fact moving toward our target? Because the risk is that inflation expectations are anchored at something less than 2%, and that would be a challenge for us. »
The Fed has raised interest rates five times since December 2015 to a range of 1.25% to 1.5%, after leaving them at zero for seven years amid the 2008 financial crisis. The central bank has also started to gradually shrink its $4.5 trillion balance sheet, expanded sharply during and after the financial crisis in an effort to stimulate investment.
The market’s latest downturn has been driven in part by fears that inflation may take the Fed by surprise, forcing it to tighten policy more quickly — potentially four times this year, or even more.
Kashkari, however, argues that the Fed should move more slowly. The jobs data « to me doesn’t say that we’re overheating, » he said, adding: « People are choosing to enter the workforce in a modest-wage-growth environment. Let’s see if that continues. »
Some investors tied the market’s uncertainty to the change of guard at the Fed’s helm, as Jay Powell took over for Janet Yellen as Fed chair.
« I’ve gotten to know Jay Powell quite well over the past two years, » Kashkari said. « He’s quite pragmatic and not ideological. So I think we’re in good hands. »
Uncertain impact from tax cuts
« I’ve been surprised at how much optimism among my contacts the tax cut package has generated, » Kashkari said. « Whether that leads to major upshifts in investment remains to be seen. »
« It’s possible on the margin the tax cut could help us in the near term achieve our inflation target. » he said. « That would certainly be welcome. But it has not fundamentally changed my outlook for economic growth or economic potential. »
Kashkari pointed out that there were many factors other than tax cuts that affect economic growth. « Productivity is enormously important and is still very hard to forecast, and then we have the very real demographic challenge of basically no working-age labor-force growth, and that’s a constraint on our economy, » he said.
Kashkari has been vocal in pushing back against more restrictive immigration policiesbeing considered in Congress.
« The math is very clear, » he said. « If you cut overall workforce levels, you have a reduction in GDP growth. I think there are pro-growth immigration policies that I would love to see Democrats and Republicans coalesce around. »