The New Vocabulary Of Monetary Policy Is Going To Be Brainstorming Again

At present, the market is strongly inclined to raise interest rates in December.

Therefore, the introduction of obvious pigeon signals before Yellen is bound to cause confusion.

In the "high-pressure" economy, the unemployment rate can be reduced to full.

Inflation can also go beyond target, and then the Fed will start tightening policy.

Although it does not sound disruptive, the Federal Reserve is at a unique moment in the history of monetary policy.

Since June 2006, the Fed has increased interest rates only once, and has been holding on since then.

Although officials said they would raise interest rates four times this year, the Fed still returned to its moratorium.

When it comes to the Fed, investors seem to have been thinking less than enough. A new term of monetary policy recently mentioned by Federal Reserve Chairman Yellen has once again triggered a brainstorming.

In his speech to the Boston fed this month, Yellen said that running the "high pressure economy" could further rebound the economy from recession.

"When the economy is far away from the energy, it's a pleasant word."

But for some people, especially for some Fed officials, the concept is dark.

They worry that the central bank will be allowed to rush to rectify the economic downturn, allowing the economy to overheat.

"I think it's a bit risky," said Jim Paulsen, chief investment strategist at Wells Capital Management.

"What worries me is that everyone, including the Fed, has accepted the fact that interest rates will remain at a lower level for a longer time.

No matter how big a consensus it is, it makes me shudder. "

It shoulders the dual mission of full employment and price stability.

The economy has made considerable progress, far from the target of employment, but still far below the inflation target.

"You have to think twice.

Despite the mixed economic data, she has been implying that interest rates will be raised, "said Quincy Krosby, a strategist at Baode's letter financial group." you have to ask her if she wants to raise interest rates for a different reason. "

In fact, Krosby is not the only one to question Yellen about "

Is it not just a tiny policy step?

Yellen, known for his moderate view of interest rates, is facing the challenge of a few of the FOMC officials who are eager to restore interest rate cycles.

Among them, Rosengren, chairman of the Boston fed, has long been a dovish attitude.

Yellen seems to be standing on Rosengren's site to publish the "high-pressure economy" commentary.

In the short term, raising interest rates one to two times may lay the foundation for Yellen to follow a more moderate long term tightening cycle.

"I have heard of similar ideas. Maybe this is all the gesture of Yellen and others. They do not want to be forced to raise interest rates too fast or too hard to tighten up," Paulsen points out.

According to this view, "she is not really paved the way for running an overheated economy. She is just trying to get bargaining chips."

The discussion raised concerns about the direction of investment.

The Fed's policy is the cornerstone of the bull market that has been opened since March 2009.

It is also at the centre of economic recovery.

It may also be divorced from these two situations.

"The problem is that a high-pressure economy is just as difficult to control as a fire hose," said Nick Colas, chief marketing strategist at Convergex, in a client's report.

"Although the situation is rare in history, the cooling of US stocks and bonds may be an unexpected consequence."