The blackout period on policymaker remarks ended after the release of the FOMC statement on Wednesday. Kashkari commented specifically on the impact of Powell as Chairman: “I think he’s a very serious, thoughtful policymaker. So I’m not anticipating the transition from Chair Yellen to Chair Powell will lead to a big change in the way we conduct monetary policy.” Williams noted that Powell represented “a nice combination of both strong consensus-building skills and also will make sure that we’re moving ahead in the right direction.” We agree with both assessments.
New York Fed Markets Group chief Simon Potter gave a speech defending the efficacy of asset purchases: “We have learned that asset purchases have clear benefits at the zero lower bound, perhaps with more limited costs than initially raised…we had greater-than-expected capacity to conduct large purchases without harming market functioning.” He observed that “the market response to the commencement of the Fed’s balance sheet reduction has been calm,” and pointed out that “the relatively muted increase in term premiums seen so far may in part reflect the non-zero probability that market participants assign to the FOMC deploying the balance sheet again if future economic conditions were to warrant more monetary easing.” He also cautioned that outright sales of securities could erode the credibility and, therefore, efficacy of future asset purchases.