Posted To: MBS Commentary
Powell was reasonably dovish yesterday. He immediately shut down a reporter who asked when we could talk about tapering. He reiterated the need to remain accommodative for longer than normal this time and that the Fed’s reaction function would not be as anticipatory as it had been in the past (i.e. they’re going to wait to actually confirm certain things are happening as opposed to merely being pretty sure those things are about to happen). The median Fed forecast still calls for 2 more years of zero rates. The list goes on. But one counterpoint to the ostensibly dovish commentary is that by delaying the reaction function and tolerating 2.5%-ish inflation, the Fed runs the risk of ushering in an era of ACTUAL inflation–the likes of which we haven’t really seen in a long time (unless…(read more)
