The Fed kicked off an action packed week of central planning with the release of its minutes and the regional Fed presidents trotted out any number of strange narratives. Here are a few.
New York Fed President Bill Dudley (8/18/2016):
"Let's imagine that the third quarter has very very strong productivity growth, accompanied by weak gains in payroll and employment... Well then you probably would not put much weight at all on the strength of GDP. At the end of the day, how the GDP growth translates in terms of employment gains is probably the more important element."
OUR TAKE: So Dudley wants us pay attention to the jobs market. Well, jobs growth put in its year-over-year peak in February 2015. It's been declining ever since.
St. Louis Fed President James Bullard (8/17/2016):
In a presentation entitled “Normalization: A New Approach” today during the Wealth and Asset Management Research Conference at Washington University in St. Louis, Bullard said rates should remain flat over the next two and a half years. “If there are no major shocks to the economy, this situation could be sustained over a forecasting horizon of two and a half years," he said. "These facts suggest that it may be time to quit using the old narrative.”
OUR TAKE: LOL
Atlanta Fed President Dennis Lockhart (8/16/2016):
“I’m not locked in to any policy position at this stage, but if my confidence in the economy proves to be justified, I think at least one increase of the policy rate could be appropriate later this year,” Lockhart said. "Early indications of third-quarter GDP growth suggest a rebound. I don't believe momentum has stalled. I remain confident about prospects in the second half of 2016 and 2017."
OUR TAKE: U.S. growth has slowed from 3-2-1%. What makes him so sure growth will accelerate.
san Francisco Fed President John Williams (8/15/2016):
"There is simply not enough room for central banks to cut interest rates in response to an economic downturn when both natural rates and inflation are very low," Williams said in the latest issue of his regional Fed bank's Economic Letter on Monday. There are “limits to what monetary policy can and indeed, should do... the burden must also fall on fiscal policy do to its part."
OUR TAKE: Williams was calling for up to 5 rate hikes in 2016. Now he says we need fiscal policy because U.S. economic growth is sluggish. Thanks for coming out.