JAN 31, 2018
Well, here we are again. Another Fed boss. Will Jerome Powell take his place in a long line of those determined to do little more than spout comforting but meaningless tropes while kicking the can of finance-system reckoning further down the road after years and years of interest rates designed to deliver artificial stock market support?
So Jerome Powell has a decision to make, be a Janet Yellen clone, or show markets that a new sheriff is in town and that he means business. But by doing so he may risk upsetting markets. The classic trap the Fed has placed itself in.
And by the looks of volatility markets are already at the verge of getting very upset as the $VIX is testing a breakout of its multi-year trend line:
With tax cuts removed as a potential stimulus tool to deploy during the next recession the Fed is now the final line of defense again. And the Fed needs tools in addition to QE4 down the road. It needs to be able to lower interest rates again when the time comes.
And 1.25-1.50% is just not a good enough height to start from. What say you Jerome? Shock & Awe or blow more air into the bubble?