While not sure why all Federal Reserve Chairs do not do this type of event … there are an even dozen Fed Banks scattered across the country for roots in various geographic areas, we are very happy our local favorite, Dallas’s own Federal Reserve Bank President, Robert Kaplan has started his own town hall event.
Think this is our third or fourth attendance, with the first as mentioned here, becoming an accidental question…
Incidentally at this event, the first three questions were from acquaintances… Great Minds I guess!
Another Robert Kaplan Town Hall Update New York Fed Williams Chimes in
The most important item mentioned in this town hall was that Kaplan supports a taper of the 120 billion monthly purchases of Mortgage and Treasury bonds as soon as October, with an announcement in two weeks at the September 22, 2021 Fed meeting.
Luckily with the delay of the weekend to produce this full post, New York Federal Reserve (debatably the most powerful bank) Chair John C. Williams in a speech via video conference to St. Lawrence University said the following:
“There has also been very good progress toward maximum employment, but I will want to see more improvement before I am ready to declare the test of substantial further progress being met. Assuming the economy continues to improve as I anticipate, it could be appropriate to start reducing the pace of asset purchases this year. I will be carefully assessing the incoming data on the labor market and what it means for the economic outlook, as well as assessing risks such as the effects of the Delta variant.”
Wall Street Journal’s Go To Reporter Pens Friday Article
Then the following story hit the Wall Street Journal Friday, September 10, 2021 by the Fed’s favorite go to reporter, NIck Timiraos..
NIck runs with a November 2021 Taper Transition and a 15 Billion per meeting drop off from the current 120 Billion monthly purchase…
What to Watch – Longer Term Interest Rates, Markets Themselves
If this is true, and the FOMC does begin taper, we will need to keep a sharp eye on interest rates, especially the longer end i.e. 10 year treasury.
Near then end of 2018, the FOMC began lowering asset purchases AND raising rates at the same time… Markets protested with a sharp 20% drop, causing Fed members to reverse course.
Kaplan and other officials are reiterating that just because the Taper may begin, interest rate increases are not on the horizon yet.
Recall in our very recent Kyle Bass review, where Fed officials are known to carefully watch the Capital Market reaction to their comments. If as true as Bass thinks, Fed officials will be watching close!
Other Kaplan Notes from the Town Hall:
- Delta hurting travel, and leisure, Dallas Fed US GDP estimate 6.5 down to 6 because of delta
- Slow workers with Jobs, Aug jobs number not surprised Sept slower than expected, JOLTS showing work avail, fear of delta keeping away,
- 3 mill folks left workforce since 2-20, 1.5 milion left for care of kids – matching problem work
- Supply demand on materials, PCE will be 4% PCE headline will be 2.6% 2022-
- Economy recovering slow Q3 but still growing, 3% inflation 2021
- Economic Fits and starts bc delta- vaccine, booster, masks help but
- High frequency mobility data not falling, folks adapting and managing through
- Business expect supply demand last longer than thought
- Worker demand higher pay, higher absence, reluctant to come back to labor force
- Mid to small business tougher time with employee—Larger Businesses more flexibility
- Broadly all businesses raising prices and they will stick
Apologies for the length of this post … this was a combination Reporter, notes and collection of various data points…
A smooth transition is very important, and long desired by many in the investment community, buckle up and let’s see how it goes!
Have a Great “Smooth Taper Transition” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth