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(M2) Correction Extends

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Late Session Rebound

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(M2) Corrective Cycle Remains In Play

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(M2) Gains Still Considered Corrective

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FED

In his second media appearance of the morning, this time on Yahoo finance, Minn Pres Kashkari provides a few more talking points:

  • On rate hike path: Thinks the FOMC will likely hike at the March meeting; then will "see where the data goes". Says there is some value in adjusting rates in the near future; conceivable FOMC could move in the spring and then pause. He doesn't want to use terms like "gradual" or "deliberate" for the path ahead, as "too much is outside our control", and the Fed needs more information before deciding what they'll do a few months from now.
  • On the yield curve: Says he is paying attention to the yield curve. Notes the Fed influences the short end, and the long end is indicating the US economy is probably headed to a more moderate growth and inflation regime in the future. Says that long-term structural factors are still in play, including demographics. And if they reassert themselves, then the Fed probably doesn't need to act too "hard" now. Says the yield curve provides information about where we are relative to neutral; the fact that it's flattened over the past 6 months that we're probably not that far away from neutral.
  • On balance sheet runoff: Says he doesn't have a strong view of starting time, pace; but doesn't think the Fed needs to wait as long as in the last recovery. Notes the balance sheet holds a lot of short-term assets that will run off very quickly... having experience doing it last time, we have a lot more confidence doing it this time.

MNI London Bureau | +44 203-865-3807 | tim.cooper@marketnews.com
MNI London Bureau | +44 203-865-3807 | tim.cooper@marketnews.com

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