Fed’s Williams is urging monetary policy wizardry – Rabobank

Michael Every, Head of Financial Markets Research at Rabobank, notes that the Fed’s Williams is urging monetary policy wizardry with a major rethink on where neutral real rates lie now (spoiler: lower).

Key Quotes

“He is proposing the exploration of alternative monetary policy strategies, including moving inflation targets higher (meaning ‘keep rates low’); or targeting nominal GDP growth (which at 2.4% y-o-y in Q2 vs. a 1948-2007 average of 7.1% again means ‘keep rates low’); or, potentially, negative rates.

The latter would of course mean most global govies would be negative yield in short order, which would cast a stupefy spell on anyone hoping to retire. Williams also argues fiscal policy must be more proactive while dodging the issue of public debt levels - a major admission in that key omission given usual ‘balance the budget’ rhetoric from central banks.”