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
And while what we've seen thus far should not be enough to knock the economy off the rails, if you keep doing that, it does eventually add up.
Right.
I think that if there was anything important that may have changed in the last six weeks, it may in fact be the view of how much inflation risk there is out there.
Right.
There's always been two main ingredients to what the Fed thinks is the outlook for inflation.
One is expectations.
Do people expect inflation to be higher or lower in the next year or two?
Because those expectations can be self-fulfilling.
And the second is the degree of slack in the economy.
Are there a lot of unused resources, which tends to put downward pressure on prices and wages?
Well, here we are with the unemployment rate still near a 50-year low, so there isn't a lot of slack in the economy.
But on the other hand, we haven't seen expectations go anywhere either, and actual inflation continues to come in on the low side.
So the Fed might be coming around to the view that there's just a lot less sort of inflation risk in the economy than they've been used to.
Maybe that justifies an extended period with rates at historically low levels.
So Chairman Powell was beaten up quite a lot by a lot of market commentators in December for coming across as sounding too hawkish, both on the path for interest rates and on the size of the Fed's balance sheet, which at the time it was shrinking on a schedule that he then described as autopilot.
And he was widely sort of panned for being tone deaf to the worries that were so obviously quite,
pronounced in the market at the time.
So it's possible that he was simply overcompensating this time around, that as much as he had gone too far to the hawkish side, then he's trying to average out by going more to a dovish side this week.
And if that's the case, then he has in some sense succeeded because the market is rallying as strongly now as it sold off after that last go-round.
But it could turn out to be a mistake.
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