Powell’s ‘transitory’ retreat is just the beginning
“The catch-up process – and a rapid one is required given the delays so far – could destabilize markets and the economy. It didn’t have to be this way.”
USAGOLD note: The second part of the Fed’s conundrum – risking a slowdown by cutting back on the stimulus – suddenly becomes an issue. El-Erian uses the word slowdown (not recession) which is a more distant result of the change in Fed policy. The more immediate concern, in our view, is the effect on the bond market and the elevated risk of a Treasuries sell-off and associated systemic risks. El-Erian, as indicated above, is worried about that as well. The Fed, despite the tightening rhetoric, remains lodged between a rock and a hard place.