Is the Fed Confident With the Economy?

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Dec. 18 (Bloomberg) –- Credit Suisse Director of U.S. Rate Strategy Ira Jersey and Blackrock Chief Investment Strategist for Fixed Income Jeffrey Rosenberg analyze the FOMC decision and take a look at the dot chart which gives a glimpse as to where the Fed believes the Fed fund rate will be in the future. They speak to Tom Keene and Mike McKee on Bloomberg Television’s “Money Moves.” (Source: Bloomberg)

And ira jersey.

This is what i look will -- look at.

This is a dummy chart for me.

Ira jersey and jeffrey rosenberg are looking at this dot chart.

What is this?

It is where the members of the fomc believe that the fed funds rate will be in those years.

But this is their crystal ball.

Exactly.

This is where they see the fed funds rate going, or were they would like to see it.

The median went from two percent to 1.75%. you have already seen short and markets moving.

This is the whole idea of forward guidance.

They are not seeing inflation.

We do not need to move the rate as high as you might.

Jeffrey rosenberg, this sounds like a bad science project.

It sounds like a group project in organic chemistry or nobody really wants to participate.

Is this effective policy?

I don't really know.

This is also about moving into the next phase of policy.

We are moving from purchases to promises.

And the promises of forward guidance are great, in theory.

In reality, it may be a lot more challenging for the fed to be successful on that.

That is what the story of 2014 will be all about.

Does the fed have credibility?

It is easy to have credibility when the economy isn't doing great and inflation is falling.

It will be a much more challenging environment if the economy is signaled what it's doing recently and inflation finally starts to find some footing on the upper side.

Those friend and yield curves maybe a little bit more volatile than the fed hopes they will be.

What is the presumption, jeffrey rosenberg, of future inflation?

What is the likelihood that viewers were world wide -- that viewers worldwide will see inflation next year?

This is not an inflationary problem.

First and foremost, people have too much fear of inflation.

The problem is that we have not had enough inflation.

However, the u.s. might see the bottoming of inflation figures, and in the beginning to rise.

We will call it one percent to maybe one .5%. -- to maybe 1.5%. that trend may undermine the forward guidance of -- objective of the fed to keep the interest rates on the short end of the curve.

You talk about the credibility of guidance.

I'm wondering if janet yellen will get a pass in the beginning, in that people will assume that she is credible, at least in the beginning of her term until such time she is proven wrong in whatever policy amendments might occur.

Especially since i note there will be changes to the fed, but ultimately the vice chair will move to the chairperson ship.

The people at the head of the table will only move modestly.

I know you know this, we have a pretty good example of that in the form of mark carney.

He did not get much of a honeymoon over there at the bank of england.

When the data really challenges the underlying forecast of the fed and that rates of change begin to challenge that, the market may not be as variable as the fed hopes it will be.

The dow is up 161 points right now.

Michael mckee, you are so good at analyzing the forecast.

What should i look at?

In employment forecast, the inflation forecast, gdp forecast, the forecast for your denver broncos?

Which matters?

It depends on who you talk to.

I think the broncos.

No, but it is the policy they are basing this on.

We will watch in march to see as

This text has been automatically generated. It may not be 100% accurate.

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