Fed has Recession Tools, Promises to Use them Quicker Next Time

-edited

New York Fed president John Williams is yapping today about recession tools and ability to use them quicker.

Outlook Favorable

New York Fed president John Williams says baseline forecasts are positive despite a mixed picture from trade and geopolitical tensions.

The "Outlook Very Favorable" says Williams.

“Right now, the outlook is actually very favorable,” Williams said during a talk at the University of California, San Diego. He said GDP growth is around 2% rate, with a “very strong” labor market and inflation near a 2% rate.

Curiouser and Curiouser

Williams noted that "economists are notoriously bad at predicting recessions". So how does he know that conditions are favorable?

Nonetheless, things are so favorable that Williams made this curious statement “I think there are definitely a lot of uncertainties and risks out there that we need to be navigating.”

Other Curiously Favorable Statements

  • "The Fed is grappling with the how to model trade uncertainty."
  • “We don’t have as much experience with this".
  • "And sentiment seems to change from one week to another."

We Have Tools

Not to worry, the Fed has the Tools to Fight a Recession and Can Use Them ‘More Quickly’ Next Time

  • New York Fed President John Williams said he’s confident the central bank has the right tools to fight the next economic downturn.
  • He cited forward guidance and quantitative easing as the Fed has limited room to cut rates.
  • Williams also said worries about the negative consequences from using QE and low rates didn’t materialize.

Curiouser and Curiouser and Curiouser

The Fed has the tools, and will use them quicker.

And Williams is confident about having the right tools, even though he is worried about using them.

The main tool appears to be forward guidance. The Fed will tell us what it will do even though it may have negative consequences.

This all makes perfect sense somewhere down the rabbit hole.

Mike "Mish" Shedlock

Comments (16)
No. 1-11
Bam_Man
Bam_Man

The Fed's "tools" consist of a box full of hammers.

abend237-04
abend237-04

Dear John,

It's next time. Avoid verbosity. "Whatever it takes" is the phrase you're searching for. You're welcome.

Thousands of zombie corporations and a whole generation of brilliant stock pickers are are relying on you just now.

KidHorn
KidHorn

Their only tool is to print money and produce bubbles to replace the bubbles that popped. Always has been.

Sechel
Sechel

all these tools give the appearance that the fed somehow knows what's going on and has precision instruments to deal with the situation when in reality they're making intelligent guesses and trying random things until they find something that looks like its working.

a lot of hubris from a body that has failed to recognize just about every crisis

Country Bob
Country Bob

The whole time Williams was talking, I kept picturing that old man in Wizard of Oz, scrambling to pull levers and trigger special effects to make the Wizard hologram appear powerful and menacing.... while that "ferocious" little dog pulls back the curtain and makes it obvious 'the wizard' is just special effects.

Mish
Mish

Editor

"The whole time Williams was talking, I kept picturing that old man in Wizard of Oz, scrambling to pull levers and trigger special effects to make the Wizard hologram appear powerful and menacing.... while that ferocious little dog pulls back the curtain and makes it obvious 'the wizard' is just special effects."

Good observation. I actually have an image somewhere of Williams in a wizard suit.

Not sure if I can find it.

JonSellers
JonSellers

The Fed has one tool: buy bank generated bad debt at par to keep the whole house of cards from periodically collapsing. This has two very positive results: bankers can keep getting rich from generating bad debt, and the millions of Americans thrown out of work won't grab their torches and pitchforks and head for DC.

Six000mileyear
Six000mileyear

Claiming to have tools is one of the FED tools.

Cheesie
Cheesie

Are these guy for real? It is like a Monty python skit.

gsl
gsl

The lower interest rates go, the more people feel they need to save because they are getting no return on their savings, hence they spend and borrow less. Because of this it seems to me lowering rates have exactly the opposite of the intended effect.

Sechel
Sechel

rates are near zero. pray tell , what tools will the fed use if the economy tanks, they're out of bullets already.