The last Current Affairs unit of the year will explore the role that the Federal Reserve played coming out of the Pandemic. How did the Fed deal with its important mandate to preserve price stability? What could Jerome Powell have done differently? We will examine the three most significant policy tools available to a central bank in fighting inflation: interest rates; quantitative tightening; and coordination of monetary and fiscal strategies with Treasury. Since the viewpoints on these matters vary widely among the media and the public, discussions at this CA session are expected to be lively. Bert von Stuelpnagel will start with an introduction of the subject and moderate these discussions. He says that his two objectives for the session are (i) to better understand what happened, but also (ii) to allow participants to make an assessment of what interest rates might do going forward.

Bert wrote his master’s thesis at the State University in Munich on monetary policy in 1977. For the next 40 years he worked in the banking industry, always on the fixed income desk, ending his career as the head of dollar capital markets at BayernLB, New York. In the 1990s, he served on the board of the Financial Markets Association. In retirement, he has remained an avid Fed Watcher, always guessing what the Fed may be up to next, and appreciative of Chairman Greenspan’s one-liner that “if I made myself clear about future interest rates, you must have misunderstood”.

Recommended Readings:

Paul Krugman, Wonking Out – Are High Interest Rates the New Normal? New York Times, September 29, 2023

https://www.nytimes.com/2023/09/29/opinion/natural-interest-rate-higher.html

Board of Governors of the Federal Reserve, September 19-20 FOMC Meeting, Press Release

https://www.federalreserve.gov/monetarypolicy/fomcpresconf20230920.htm

MarketWatch, Ray Dalio thinks the U.S. is courting a debt crisis. Are regulators moving fast enough to avert it? October 12, 2023

https://www.morningstar.com/news/marketwatch/20231012318/ray-dalio-thinks-the-us-is-courting-a-debt-crisis-are-regulators-moving-fast-enough-to-avert-it

Reuters: Fed’s QT mix may be capping, not spurring, long term yields, October 11, 2023

https://www.reuters.com/markets/us/fed-qt-mix-may-be-capping-not-spurring-long-yields-2023-10-11/

Wall Street Journal: Where have all the Foreign Buyers Gone for US Treasury Debt, November 17, 2023

https://www.wsj.com/finance/investing/where-have-all-the-foreign-buyers-gone-for-u-s-treasury-debt-3db75625?mod=hp_lead_pos10

Forbes: Here is the Fed’s 2024 Meeting Schedule and Interest Rate Outlook, November 18, 2023

https://www.forbes.com/sites/simonmoore/2023/11/18/heres-the-feds-2024-meeting-schedule-and–interest-rate-outlook/?sh=7965589b284c