“I do not think that they’re crazy enough to listen to the idiots on Wall Street to save their money,” dickbovesays tells HeleneBraunn.
With the global economy teetering and markets in turmoil – the recent crash of the British pound and bond market being the latest examples – central banks are facing an acute dilemma they haven’t dealt with for a long time: choosing between price stability – tightening monetary policy to keep inflation from spiraling out of control – and financial stability – keeping financial markets from seizing up.
“The general thesis is whenever the United States economy gets in trouble or the financial system is stressed, that the Fed can print money and solve the problem and we don't have to worry about anything,” said Dick Bove, chief financial strategist at Odeon Capital. “But I think what we’ve learned is that you can’t be doing what we’ve been doing.”
With a long road still ahead for Fed Chair Jerome Powell and his colleagues to bring the current inflation level of 8.3% back to near its 2% target, U.S. markets could get a lot worse. Might the Fed need to do a pivot a la the Bank of England and return to outright purchases of bonds? For its part, Fed officials keep reiterating they won’t pivot to easier policy because of shaky markets and the recent dot plot shows continued rate hikes into 2023. Market participants aren’t so sure, with a glance at the fed funds futures market showing no rate hikes priced in for all of 2023 .
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