The stock market is an important price signal for the Fed, I’m not surprised to see the volatility — Esther George

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the stock market is an important price signal, he said Thursday Kansas City Fed President and FOMC member Esther George in an interview on CNBCbefore adding that he is not surprised to see volatility, and should not be ruled out as it is a sign of tightening financial conditions.

US equities had their worst day on Wednesday since June 2020, with the S&P 500 down more than 4% and the Nasdaq 100 down more than 5%.

Additional statements

  • The Fed’s policy is not aimed at the stock market, but the effects of the policy will be felt there.
  • In determining when policy tightening is “enough,” the main focus is on inflation figures.
  • Homes have been in pretty good shape, but people seem to be feeling the trade-offs now with higher prices.
  • The Federal Reserve will succeed in reducing inflation, but it is difficult to know how much tightening will be necessary to do so.
  • I’m not sure that choosing a number around “neutral” is of any value when setting rates and that it’s better to look at the effects of policy.
  • Overall, I expect real interest rates to be positive.
  • It is too early to determine how far to raise interest rates; if consumption changes, for example, the Federal Reserve might not have to go that far.
  • I feel comfortable doing half point rate hikes.
  • The Fed would need to see something “very different” to support further rate hikes.

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Source: Fx Street

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