Similar to “Moby Dick,” Ishmael and Chairman Powell are often confused as the protagonist. In the bible, each Ishmael experiences a miracle rescue. Chairman Powell is now charged with orchestrating a landing which only time will tell the type. His actions are challenged between short term actions and longer-term outcome.
Powell is the lead character in the US novel of monetary policy who wields great power. The old adage still holds true, “Don’t fight the Fed.” His actions are clear and transparent. However, the shape of the yield curve paints a very specific perspective. Short rates will probably be pushed a touch higher, but by year end there will be pressure towards lower rates especially as markets are discounting mechanisms. Another adage was spoken by then Secretary of Treasury Robert Rubin who said that the FOMC cannot change the direction of rates but simply can support the natural direction. It will be a surprise if rates stay high for long and any change in policy will simply reinforce what investors believe is the fair level for risk/return.