Some interesting info on interest rates and the Fed.
Funny - I'm watching it now too.
TL ; DW:
- Gene interviews Prof Louis Johnston (U of St Johns)
- Fed wants you to trust them and stay calm
- Market believes that Fed will not be successful in controlling inflation
- Temporary inflation example now: ability to get silicon chips (two places that manufacture - both in E. Asia)
- Data for Fed is reliable but have to pick the right gauge; CPI will show a way bigger burst in temp inflation than other metrics
- Prof Johnston believes Fed messaging and credibility; therefore don't build current outlook into long term models
- QE 101: Suppose rates for 10/20/30 Y bonds go up. If Fed believes it's too high, they will go out in the market to buy to lower rates
- Possible but not likely Fed will QE unless rates rise significantly and/or credibility is called into question
- What more can the Fed do? A: That's up to Congress to change mandate (ie. buy corp bonds, etc) - unlikely but have been used in 2008 and early 2020
- Average person will be spending more on homes for 30Y mortgage due to inventory + long end rates increasing
- Forecast: Long rates will go up (3-4% for gov bonds) but will come down again; depends on economy growth and pent up demand. If strong GDP growth >4%, interest rates (gov bonds) may increase to 4% at the long end