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Paulo Gustavo Grahl, CFA
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Tim, very good insights, as always. You mentioned "but in my mind the flattening of the yield curve is a red flag that the Fed has less room to maneuver than implied by the SEP" to argue that the market believes (sort of) in the US secular stagnation story. But there could be another explanation (also hinted by Dudley in his latest speech*): Greenspan's conundrum again! With 10-year Bunds at 0.7% and 30-year yields at 1.5% one might expect the long end of the US yield curve to be well bid. And Dudley even mentioned that if the conundrum story repeats itself, keeping Us financial conditions too loose, the Fed may need to increase short rates more forcefully than what is currently anticipated. *
Toggle Commented Dec 11, 2014 on Challenging the Fed at Tim Duy's Fed Watch
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Paulo Gustavo Grahl, CFA is now following Tim Duy
Sep 2, 2014
Tim, very good post. You've raised the question that puzzles me: why did the Fed start with the tapering talk to begin with? I think the earlier speech from Bernanke, Powell and Stein give a clear answer: FOMC was worried about financial stability (mostly in bonds). These markets have adjusted somewhat -- and Bernanke even acknowledged that this was good. So, does this mean they could postpone tapering? I don't think so. I agree with Tim's point that if it has already been decided, thus the sooner the better. There is also the argument that by December Bernanke will be a lame duck -- with the new Fed Chair already announced -- and if Bernanke waits until Dec., why not then let the next Chair decide what to do?
Toggle Commented Aug 5, 2013 on Septaper or not? at Tim Duy's Fed Watch
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Bill, This was all true a couple of months ago. So why start the taper talk and even mention Sept as a possible date? Why Bullard got so upset highlighting the FOMC had changed its policy from data dependent to "date" dependent? So for me the key question is why has the FOMC changed its view since May (if it indeed has)?
Toggle Commented Aug 5, 2013 on Early 3Q Data Lifts Off at Tim Duy's Fed Watch
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Tim, a follow up question/comment: The SEP part of the minutes contained the following statement: "About half of these participants indicated that it likely would be appropriate to end asset purchases late this year". So half are not even talking about starting tapering later this year, but ENDING QE. I understand there are probably several non-voters in this half...but anyway it sounded a lot hawkish. Should we give comments in the SEP section the same weight as comments in the "participants' views on current conditions"?
Toggle Commented Jul 11, 2013 on From Minutes To Bernanke at Tim Duy's Fed Watch
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Good points. I would add the following to the "where is Bernanke's 7% unemployment trigger?" puzzle: * Did Bullard attend the same meeting? Recall that the day after the FOMC meeting Bullard released an official note where he explained why he dissented. Besides inflation, Bullard mentioned he "feels strongly that state-contingent monetary policy is best central bank practice, with clear support both from academic theory and from central bank experience over the last several decades. Policy actions should be undertaken to meet policy objectives, not calendar objectives". So Bullard came out of that meeting feeling that the FOMC had changed to "date" dependent policy rather than "data" dependent. But reading the minutes it seems the other way around...did I miss something in the minutes?
Toggle Commented Jul 11, 2013 on From Minutes To Bernanke at Tim Duy's Fed Watch
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Paulo Gustavo Grahl, CFA is now following The Typepad Team
Jul 11, 2013