Powell’s Dove Transformation

Kaoboy Musings 11 – 10/30/2019

Powell's Dove Transformation

I just listened to the Fed press conference, and my take is that Chairman Powell has decidedly turned dovish. 

Even though he re-emphasized that the recent reserve additions should not be construed the same way as the longer-term Treasury purchases of QE, Powell made it very clear that the 2% inflation target is what he is most concerned about.  The USD (as measured by the DXY which I cited yesterday) initially spiked on worries of a “hawkish cut” – that Powell was going to cut one last time and then re-affirm vigilance on when to go back to a hiking stance.  Instead, Powell said that “we are not immune to disinflationary pressures from around the world” and would not look to hike again unless there were sustained signs of a resurgence of inflation.  I think this is very significant.  To me, it shows that Powell understands the concern of a too-strong USD importing economic weakness from abroad and is willing to stay accommodative and even let the economy run a bit “hot” before the next hiking cycle.

The DXY immediately reversed course on this statement:

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Kaoboy Musings is a private distribution list/blog that I created to encourage dialogue regarding the economy & markets, geopolitics, investment ideas, and life in general. I have a passion for the markets and investing, and even though I no longer accept investor capital, I try to keep current on global events and opportunities and remain active in the markets.  I’ve always found that writing my ideas down, sharing them with smart people, and encouraging two-way discourse and devil’s advocacy is often the best way to validate or invalidate a thesis and stay mentally flexible.

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