The ordinary arrangement of life has changed somewhat here. I am now working from home full time. So, I can have the television going while I am working and can pay attention to it as time permits. And it just so happened that yesterday I was able to pay some attention to Chairman Powell’s news conference, at least enough attention to watch his denial that the Fed had anything to do with the recent soft patch in the economy and much more frequent use of the “R” word by everyone else. His expression changed dramatically when the question was asked about policy conduct and economic slowing; kind of like deer-in-the-headlights, “I really would rather be somewhere else”, look on his face and he had to choke out the denial.
In my view, it would have been better to say perhaps we did shave a little too much off the top, but it was caught in time. I’m disappointed that he didn’t because those soft patches that one can’t really point out the cause as most of watch the more elastic of prices sink along with NGDP expectations, and all of this going together with some gung-ho asset selling at the Fed are more than likely related. At the very least the asset sales violated the dajeeps rule of thumb – the Fed should not be selling assets while everyone else is – and exacerbated whatever is Powell’s idea of the cause; though he neglected to mention what he believes is the cause, leaving us all to guess.
For the record, because NGDP expectations did sink somewhat, I say the Fed was likely ground zero on the soft patch. At least if the Fed were level targeting NGDP growth, there would be somewhat of reasonable explanation and teachable moment involved in why the FOMC made the choices it did. But with this sort of nebulous and elusive inflation target that often has an exchangeable index (we’re targeting core PCE – we’re targeting headline PCE), the only real explanation is zealotry. And in that situation, what is the Chairman to tell people who lost a lot of money? He tries to pass off some whopper of a denial. It’s just sad.
For all of the perverse sort of results that can be achieved with it, including the more trivial ones like putting the Chairman in a situation where all he can do is misrepresent the truth, it’s time to put the inflation target to bed now.