The Time Has Come

Jerome Powell, the Chair of the Federal Open Market Committee, and I have never met, so I have no idea what his music collection contains.  He may, however, have dropped a hint that he is a fan of Midnight Oil.  This Australian band had a global hit in 1987, “Beds are Burning.”   Click here to see the video.

It is rich to suggest the Federal Reserve Chair might have streamed the anthem while writing his speech for the Jackson Hole Symposium last month.  Just as the lyrics laid out an easy-to-understand course of action, Jerome indicated that, “the direction of travel is clear” for interest rates.  Saying explicitly, “the time has come for policy to adjust.”

The Federal Reserve has spent the last several years taking liquidity out of the economy.  They do this with their monetary policies which then impact borrowing costs.  In short, when there is less money supply sloshing around the system, the cost to use the funds (i.e., interest rates) rises, thus creating friction against economic growth.  Now what the central bank appears to be poised to do with liquidity starting later today is “give it back.”  Look for their announcement at around 11:30 am here on the West Coast.

With near certitude, the financial landscape is set to begin shifting today, echoing the call for action immortalized in the song.  In it, the band argues for returning land to Indigenous Australians, expressing it urgently.  Just as "Beds are Burning" served as a rallying cry for changing policy, today's monetary policy decision will likely mark a decisive move toward economic recalibration.  In the spirit of the music that may resonate with Jerome Powell, it's time to acknowledge the economy needs a new rhythm.  The stage is set, financial players along with their fans are ready, and the next act in monetary policy is about to begin. Dunh dunh dunh!