“Fed Speak” Becomes Uncommonly Clear

“Fed Speak” Becomes Uncommonly Clear
Over the years it has been a challenge to read what the Fed says let alone what it is going to do.
Those who lived and worked through Chairman Alan Greenspan’s reign will recall how the term “Fed Speak” was given birth.
Well, today we have a breath of fresh air, if the economic weather holds fast.
Federal Reserve Governor Jerome Powell appeared in an interview on CNBC today and gave some insight into what the Fed is weighing as it decides when to raise the prime rate in the coming months.
• “If we stay on the current path it would make sense to raise rates sometime during 2015, perhaps in the middle of 2015…”
• “The time to raise rates is coming; it’s just not here yet…”
• “Inflation is below the Fed target of 2.0%…”
• “Unemployment is above target…”
• “And both of these suggest need for continued accommodation…”
• “Inflation is weak around the world and here, energy prices are low here and that is going to feed into inflation here for a while. Inflation is likely to remain low for some time…”
• “We need to see progress toward the 2.0% target…”
• “Interest rates are low, stock prices are high and energy prices are low. All of those things are supportive of consumer activity. Consumer Confidence hit a 7-year high on Friday.”
• When asked whether low-interest rate policies have created excesses in the financial system that would come back to haunt us, Powell answered: “I would say things are fully prices out there but I really don’t see bubble territory and we don’t see leverage building up and that sort of thing. I can’t make a case that we are at risk of significant financial instability.”

Reference-Economic Focus

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