WASHINGTON (Reuters) – Federal Reserve vice chairman Randal Quarles said the Fed’s increasing “data dependence” does not mean it will react to every rise or fall in economic statistics or markets, but only to “significant changes in direction.”
After a week in which markets have swung in their interpretation of where the Fed is heading, Quarles appeared to anchor the Fed’s ongoing move towards slow but steady interest rate increases.
Data - Wavering - Dial…We - Communications - Path
“We should be data dependent but not reacting to every wavering of the needle across the dial…We have described in all the communications tools a path that is pretty clear,” Quarles said. “We are following a strategy and taking account of data over time as it comes in and in response to significant changes in direction.”
That path currently has the Fed raising rates later this month and throughout 2019, an interpretation some investors have called into question given the recent focus of policymakers on weakening global growth and other recent data.
Stock - Markets - Week - Remarks - Fed
Stock markets in particular rose dramatically last week after construing remarks by Fed chair Jerome Powell to mean that the central bank may be nearer than thought to pausing the cycle of rate increases it began in late 2015.
Yet the signals are far from clear as Fed officials, for example, weigh how dropping oil prices may influence their progress in sustaining 2 percent inflation, and how to assess a renewed narrowing in the gap between short and long term bond rates. The gap between 10 year and 2 year Treasury securities on Monday at had fallen back to around 18.5 basis points, the lowest since July 2007, months before the official start of a deep recession.
Quarles - Powell - Fed
Yet Quarles, Powell and other Fed...
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