by Tom Keene and Francine Lacqua gave me a most appreciated opportunity to present my dollar views on Bloomberg TV earlier today. They also let me opine about current events, like Catalonia’s push for independence and May’s troubled speech at the Tory Party Conference. Bloomberg made two clips of the discussion available. The first is about the dollar’s outlook broadly. I suggest a combination of technical and fundamental factors point to a strong Q4 dollar performance. These include divergence (monetary policy and balance sheet), the morphing of European politics to a headwind from a tailwind earlier this year. [embedded content] The second clip covers part of our discussion about the Federal Reserve. I make two
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| Tom Keene and Francine Lacqua gave me a most appreciated opportunity to present my dollar views on Bloomberg TV earlier today. They also let me opine about current events, like Catalonia’s push for independence and May’s troubled speech at the Tory Party Conference.
Bloomberg made two clips of the discussion available. The first is about the dollar’s outlook broadly. I suggest a combination of technical and fundamental factors point to a strong Q4 dollar performance. These include divergence (monetary policy and balance sheet), the morphing of European politics to a headwind from a tailwind earlier this year. |
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| The second clip covers part of our discussion about the Federal Reserve. I make two points. First, in normal times, the Fed is mostly a technocratic function. I noted that one could not tell in word or deed that Governor Powell was appointed by a Republican and Yellen by a Democrat. Beginning with Volcker, every Fed chair that was appointed for a term by one party was re-appointed for another term by the other party.
Second, I don’t think central bank independence is at risk. In the first clip, I make that point about the UK. Some think the BOE took a political stance over Brexit, but I would argue that the caution it expressed about jumping into the unknown, and the self-inflicted the economic challenges that would lie ahead is exactly the kind of advice one wants from monetary stewards. The UK’s ability to absorb that initial economic fallout of the referendum, was strengthened by the measures the BOE took, including a cut in rates, granting some regulatory forbearance, and resuming QE. During the 2016 campaign, candidate Trump comments about the Fed were combative. As President, he has not tread on the Fed’s turf. There is no need. His influence will be expressed through the power of appointment. Francine pressed about the importance of loyalty and an ideologically light regulator. I suggested that as a key supervisor and regulator of financial institutions, nearly anyone qualified for the post will take that function seriously. I think one of the most important issues differentiating Fed candidates is not whether they want to hike rates this quarter or next, but their capacity to respond to the next financial crisis. |
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