Fed Has Credibility Crisis & Powell Knows It

Fed Has Credibility Crisis & Powell Knows It

Rates To 4% “Come Hell Or High Water”

Post by Tyler Durden | Written by Mike Shedlock via MishTalk.com

…some interesting statements by former Fed Vice Chair Richard Clarida and his ducking of questions on the Fed’s role in this mess.

Image of Richard Clarida from video below

Credibility Problem and Disconnect

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This perfectly illustrates both the disconnect and huge credibility problem the Fed has.

As the chart below shows, 4% is already priced in. This is not a bold “hell or high water call.” It should be a milktoast statement of the obvious. But it does not seem to be. pic.twitter.com/h16XwjvA4x

— Jim Bianco biancoresearch.eth (@biancoresearch) September 9, 2022

Richard Clarida on Squawk Box

Q: Is the fed data dependent or are they going to 4% come hell or high water.

Clarida Response

• I think they are going to 4% hell or high water if I had to out it into two boxes.
• Inflation is way too high. Inflation was way too high last year.
• Until, inflation comes down, the Fed is really a single mandate central bank.
• They are data dependent but the inflation data is too high. So I think they are going to at least 4%.
• I agree it’s not a great place to be in. If it was just Putin, you are right. But unfortunately the economy is out of balance now.

Clarida ducked hard questions on the Fed’s role in this mess while admitting he got the inflation picture wrong.

Clarida also supported fiscal stimulus, the last round of which was the big problem.

No one at the Fed saw this coming and they ridiculously kept QE going all the way to March of 2022.

So yes, the Fed has an enormous credibility problem and Powell understands that.

As a direct consequence, the Fed is highly likely to make a mistake in the opposite direction.

Meanwhile, the big spotlight appears to be on jobs and the unemployment rate.

Strong Job Gains? Don’t Count On It!

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