Futures were already weak Tuesday morning but then took another leg lower following a CNBC appearance by Stanley Druckenmiller where he discussed his WSJ op-ed outlining his views of Fed Policy titled “The Fed is Playing With Fire”. Some of the excerpts of the column give a little more detail as to Druckenmiller’s opinions of Fed policy.
Yet the Fed regularly distorts the most important price of all—long-term interest rates. This behavior is risky, for both the economy at large and the Fed itself.”
America’s deep divisions also make the central bank’s independence crucial. Fighting inequality and climate change are very far from the Fed’s central mission. There’s a reason central bankers are supposed to be unpopular.
Fed policy has enabled financial-market excesses. Today’s high stock-market valuations, the crypto craze, and the frenzy over special-purpose acquisition companies, or SPACs, are just a few examples of the response to the Fed’s aggressive policies.
What made the timing of Druckenmiller’s op-ed interesting is the fact that it came on a day that numerous FOMC officials were already scheduled to speak. Despite Druckenmiller’s criticism, though, FOMC officials were unfazed. Below are just a sampling of the headline comments made throughout the day.
Mester: Want to see more, broader progress in recovery.
Brainard: Uncertainty remains; jobs, inflation far from goals.
Daly: Hopeful economy will climb out of virus hole by next year.
Bostic: Long way to go…appropriate to stay in accommodative mode.
Harker: Let’s see how the job market heals before talking taper.
Kashkari: Long way from maximum employment.
Bullard: Too early to talk taper.
Over the last several months, there’s been an interesting divergence between Fed officials and market expectations for Fed policy. While the Fed says one thing (‘steady as she goes), the market is having trust issues and keeps thinking that the Fed will start to remove accommodation sooner than expected. Whether or not you agree with their policies, you have to ask yourself, do the excerpts above sound like the type of comments you’d hear from a Fed that was losing confidence in the current state of monetary policy? Click here to view Bespoke’s premium membership options for our best research available.