About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Wednesday, September 17, 2014

Monetary Policy

The Fed is keeping Its focus on the Phillips Curve -- falling unemployment leads to rising
inflation and rising unemployment leads to falling inflation. Currently, the US is experiencing
moderate real economic growth with falling unemployment and low and relatively static
inflation with the CPI averaging below 2%. Significant slack remains in the economy and with
little inflation pressure, the Fed appears content to continue unwinding the QE program but
keep its ZIRP until the Phillips curve aligns properly with strong enough jobs growth to foster
faster inflation. With plant capacity growing at 2.8%, there is enough supply / demand balance
for the monetary authorities to not hasten to raise interest rates and see how the economy
responds to the wind up of the QE program. On certain fundamental measures the Fed can be
seen as suppressing short term interest rates and hawkish sentiment is clearly growing on the
Board. But Ms. Yellen is not yet under duress.

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