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FOX Business host Larry Kudlow discusses his takeaways from Fed Chair Kevin Warsh’s debut at the podium on ‘Kudlow.’<\/p>\n
Kevin Warsh\u2019s maiden voyage press conference as the new Fed chairman was a masterful performance. He was knowledgeable, succinct, collegial, humble. By the way, so was the Fed\u2019s press release. Short and sweet. My two biggest takeaways were first: the central bank\u2019s emphasis right now is on price stability. Their statement emphasized strong productivity and business capital investment, along with job gains and low unemployment.\u00a0<\/p>\n
By the way, productivity and business investment on the supply-side will be a hallmark of Mr. Warsh\u2019s thinking. Yet inflation is the key target right now. As Mr. Warsh put it: “We recognize that inflation has been running well ahead of the Fed\u2019s long stated inflation goal of 2 percent. That\u2019s been going on for more than five years. Persistently high prices are a burden for the American people.” Mr. Warsh concluded: “this committee will deliver price stability”<\/p>\n
Of course if there is a deal with Iran and the Strait of Hormuz is reopened, that\u2019s going to bring inflation down substantially. Already the West Texas intermediate price has fallen over 30 percent to around $76 a barrel. Gasoline prices will soon follow.\u00a0<\/p>\n
It\u2019s not inconceivable that the CPIs for July, August, and September will be negative, which of course changes the whole inflation picture to deflation, which in turn can change the whole interest rate picture from rising rates to falling rates Yet Mr. Warsh did not rule out or rule in any rate hike.\u00a0<\/p>\n
My second big takeaway was the new chairman does not believe in the Phillips curve view that growth causes inflation. This is hugely important, because among other reasons there\u2019s a business boom going on along with the stock market, and productivity, and the A.I. revolution, all in response to low taxes, light regulation, and drill, baby, drill.<\/p>\n
FOX Business White House correspondent Edward Lawrence reports on the Federal Reserve’s decision to maintain current interest rates on ‘Making Money.’<\/p>\n
Here\u2019s Mr. Warsh on coexisting low inflation and low unemployment at the same time: “I don\u2019t share the view that was expressed a few generations ago, that Federal Reserve chairman showed up at a podium like this and say, you got to choose, and, you\u2019re going to have to decide whether you\u2019re willing to tolerate higher inflation to put more people at work. I don\u2019t believe in that.” Mr. Warsh added that “What I believe is if we do our job, we can make strong growth, low prices and strong employment mutually compatible”<\/p>\n
As far as additional Fed reforms, Mr. Warsh is setting up five task forces with people in and out of the Fed on communications, balance sheet, data sources, productivity and jobs, and the inflation framework. This is a smart move, it\u2019s a collegial move, but it also signals that reforms are coming. One key point I especially like was Mr. Warsh\u2019s mini-riff on how markets should be able to react directly to the incoming data, not the Federal Reserve\u2019s forward guidance opinions.<\/p>\n
Indeed, Mr. Warsh didn\u2019t even put his own dot into the Fed\u2019s forecast. Very cool. Yet he also talked about how you need improved data collection in our fast-changing super-advanced high-tech economy. Perhaps he\u2019s implying that good news on the economy should just be good news, not bad news because a couple of flyover regional Federal Reserve bank presidents have some whacked out opinion that a prosperous America is somehow a terrible thing, especially, wait for it \u2026 under President Trump.<\/p>\n
Speaking of good news, today\u2019s report on retail sales was a barn-burner, way above all expectations. So what happened? People started selling stocks because they\u2019re worried about the Fed raising interest rates. Let us hope Mr. Warsh ends all of that illogical thinking.<\/p>\n
#LARRY #KUDLOW #Kevin #Warshs #message #markets #good #news #good #news<\/p>\n","protected":false},"excerpt":{"rendered":"
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