Greg Ip
speaker
528 appearances
8 recordings
1 series
first heard Jan 2018
last heard Sep 2024
Greg Ip’s voice in public audio — every appearance, attributed to the second.
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Appearances
WSJ Your Money Briefing · Fed Chairman: Another Shutdown Will Damage the Economy · 31 Jan 2019
podcast
This is really quite a breathtaking pivot from the message we got from the Fed in mid-December.
Back then, they said the economy was great.
They thought they would raise rates two more times this year, albeit they were going to do it a little less mechanically than in the past.
Fast forward to today, and they've more or less signaled that they haven't just paused, but that they could be done altogether with raising interest rates.
And so you saw a very powerful reaction in the stock market.
to this message.
But I would say that I think it's got a lot of people scratching their heads, basically wondering what happened in the last six weeks to justify this pivot.
Chairman Powell mentioned a couple reasons to justify the more dovish tone today.
One was, as you say, yes, global growth was slowing in December and has continued to slow.
He cited specifically Western Europe and China.
He also talked about financial conditions, which is another way of saying stock markets are down and corporate credit markets are more hostile or less welcoming.
And that represents sort of a tightening of financial conditions, which in some sense negates the need to raise short-term interest rates as much.
And the final point he raised was that we've had this partial government shutdown, which is almost certainly going to shave something off of economic growth in the first quarter.
These all sound logical reasons for the Fed to be more cautious and careful about going forward.
There are certainly sensible reasons to pause in raising interest rates.
It's hard to understand why there might be a reason to stop raising rates altogether.
And once again, that is not a clear explanation that we got from the Fed today.
Chairman Powell was very, I think, clear that he thought that the shutdown was negative and that another shutdown would also be negative for the economy.
He does generally try to keep the Fed out of discussions of politics or specific recommendations, one way or the other, on budget policy.
But in this case, he was simply stating the obvious, what even the White House's own chief economist has said, is that we know that when you shut the federal government down, that subtracts activity from the economy.
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