[FED Watch] 미국 국채 수익률 급락 - 2019.5.13 > Fed Watch

<1> 금주의 T-Bill 수익률 곡선(Yield Curve) : 연준 4월 정기회의 직후  소폭 상승

 

 ■ 5월 3일-9일 미국 재무성 증권 수익률은 전반적으로 큰 폭으로 하락.

  

  - 특히 2년에서 10년 만기물 수익률은 9bp-10bp 하락.

  - 3월 물 또한  4bp 하락. 이는 4월 25일-5월 2일의 상승이 일시적이었음을 입증.

  - 지난 주 수익률 상승을 초래했던 “통화정책에 정치적 고려는 없다”는 파월 의장의 기자회견(5월 1일)에도 불구하고 시장에서는 향후 금리인하에 대한 강한 기대감이 형성되고 있음. 

  

  

 

<2> 제롬 파월의 환영사 : 2019 Research Conference: 

     "Renewing the Promise of the Middle Class," 

 

It is my pleasure to welcome all of you to the Federal Reserve System's 11th Community Development Research Conference, cosponsored by the community development offices of all 12 Federal Reserve Banks and the Board of Governors.

 

These biennial conferences are one manifestation of the Federal Reserve's deep commitment to supporting research that helps policymakers, community development practitioners, and researchers improve the economic well-being of families and communities. These gatherings also inform the Federal Reserve System's work in promoting consumer protection and community development, and I would like to thank all of you for your contributions to this conference.

 

This year our conference focuses on pathways to the middle class. While there are many definitions of "middle class," I think we can agree that achieving a basic level of economic security is fundamental. Surveys suggest that many Americans believe being middle class means having a secure job and the ability to save.1 In recent decades, income growth for middle-income households has lagged behind that for high‑income households.2 In addition, economic resources differ markedly by race, education, occupation, geography, and other factors. Those circumstances underscore a two-fold challenge for our country: fostering the conditions that will help lower-income families reach the middle class, while ensuring that middle-class status still provides the basic economic security that it has traditionally offered.

 

The conference organizers have sorted through the many research questions that will be addressed today and tomorrow and have taken away three key observations that are fundamental to addressing the challenges related to the middle class.

 

The first observation is to note the long-term decline in relative income growth and upward economic mobility for those in the middle. According to a number of measures, income has grown more slowly for middle-class households since the 1970s than for those with higher incomes, resulting in wider income inequality. The kind of generational improvements in living standards that were long the hallmark of the American middle class have steadily diminished. In the 1950s, better than 80 percent of children born in middle-class households grew up to out-earn their parents, but more recently only around half do. One factor in this decline is the increase in income inequality I just noted, and another is slower productivity growth. This conference will touch on other possible reasons for this decline in upward mobility and relative income, such as changes in the prospects for career advancement that vary by occupation and location.

 

The second observation is the widening gap in economic status and prospects between those with a college degree and those without one. In the 1960s, well over 90 percent of working-age men held a job, and there was very little difference in employment between those with or without a college degree. While the share of college-educated working-age men with a job has fallen from more than 95 percent in 1967 to around 90 percent in 2017, it has plunged for others. Ninety-five percent of male high school graduates were working in 1967, but only about 80 percent of them were working as of 2017. Among working-age men without a high school diploma, about 90 percent had a job in 1967 versus a bit more than 70 percent in 2017. For women of working age, the trends are less clear, but those without a college degree are also less likely to work today. Research presented this morning will discuss some possible explanations for the divergence in employment, income, and other economic prospects between college grads and others.

 

The third observation is that the prospect of moving up the economic ladder depends on factors beyond effort and talent, including your family, the neighborhood you grow up in, and the quality of the primary and secondary schools you attend. Your chances for attending college are much better if you are raised in a higher-income household, and that advantage has increased substantially since the 1980s. Another factor is geography. Some research indicates that economic prospects are better for those who grow up in neighborhoods with less income inequality, less concentrated poverty, and better performing schools. Finally, across so many dimensions, we continue to see disparities in economic outcomes by race and ethnicity.

 

These issues are crucial. Sound public policies can support families and businesses and help more Americans reach and remain in the middle class. I look forward to hearing about your discussions over the next two days, and thank you, again, for your contributions.

 

 <3> 라엘 브레이너드(Lael Brainard, January 1, 1962- ) : 확실한 매파

 

연준이사회의 두 명의 여성 이사 중에 한 사람인 라엘 브레이너드는 1962년 독일에서 태어났다. 웨슬리안 대학에서 우등으로 졸업하고 하버드 대학교에서 석사와 박사학위를 취득했다. 박사학위 취득 후 1990년부터 1996년 까지 MIT 경영대학원에서 가르쳤으며 컨설팅 회사 맥킨지에서도 여러 중책을 수행했다. 

 

클린턴 행정부에서는 경제자문위원회 부의장(Deputy National Economic Adviser) 및 국제경제문제 차관위원회의 의장직을 맡았다. 공화당 정부가 집권하자 브레이너드는 행정부를 나와서 2001년부터 2009년 까지 브루킹스 인스티튜션에서 여러 중책을 맡았다. 오바마 행정부가 들어서자 2009년부터 2013년 11월까지 국제문제 담당 재무부 차관을 역임했다. 그 후 2014년 1월 그는 오바마 대통령에 의해 연방준비제도 이사로 제청되어 상원에서 찬성 61 반대 31로 임명안이 통과되었다.

연방준비제도 이사로 있는 동안 연준의장 옐런 및 부의장 피셔의 미온적인 금리인상에 대해 신랄한 비판을 한 것으로 유명하다. 다음은 경제평론가 팀 듀이의 블로그 기사이다. 

 

“ Brainard Drops A Policy Bomb(2015년 10월 12일)”

 

What if a Federal Reserve Governor drops a policy bomb in the woods and no one is there to hear it? Did it really make a noise? 

 

That's what happened today. While the bond market was closed and whatever financial journalists were left focusing their efforts on newly-minted Nobel Prize recipient Angus Deaton, Federal Reserve Governor Lael Brainard dropped a policy bomb with her speech to the National Association of Business Economists. It was nothing short of a direct challenge to Chair Janet Yellen and Vice Chair Stanley Fischer. Is was, as they say, a BFD. That, at least, is my opinion. Consider, for example, Brainard's opening salvo:

 

The will-they-or-won't-they drumbeat has grown louder of late. To remove the suspense, I do not intend to make any calendar-based statements here today. Rather, I would like to give you a sense of the considerations that weigh on both sides of that debate and lay out the case for watching and waiting.

 

Wait, who is making calendar-based statements?  Yellen:

 

...these two judgments imply that the real interest rate consistent with achieving and then maintaining full employment in the medium run should rise gradually over time. This expectation, coupled with inherent lags in the response of real activity and inflation to changes in monetary policy, are the key reasons that most of my colleagues and I anticipate that it will likely be appropriate to raise the target range for the federal funds rate sometime later this year and to continue boosting short-term rates at a gradual pace thereafter as the labor market improves further and inflation moves back to our 2 percent objective.

and Fischer:

 

In the SEP, the Summary of Economic Projections prepared by FOMC participants in advance of the September meeting, most participants, myself included, anticipated that achieving these conditions would entail an initial increase in the federal funds rate later this year.

 

After essentially saying that such calendar-based guidance is beneath her, she says what she is going to do: Explain why policymakers should delay further. Note however this stands in sharp contrast with Yellen and Fischer. Their efforts have been spent on explaining why rates need to rise soon. Hers will be spent on why they do not.

 

After assessing the quality of the recovery, Brainard asserts:

 

In contrast to the considerable progress in the labor market, progress on the second leg of our dual mandate has been elusive. To be clear, I do not view the improvement in the labor market as a sufficient statistic for judging the outlook for inflation. A variety of econometric estimates would suggest that the classic Phillips curve influence of resource utilization on inflation is, at best, very weak at the moment. The fact that wages have not accelerated is significant, but more so as an indicator that labor market slack is still present and that workers' bargaining power likely remains weak. 

 

Recall that Yellen, in her most recent speech, made the Phillips Curve the primary basis for her case that rates will soon need to rise:

 

What, then, determines core inflation? Recalling figure 1, core inflation tends to fluctuate around a longer-term trend that now is essentially stable. Let me first focus on these fluctuations before turning to the trend. Economic theory suggests, and empirical analysis confirms, that such deviations of inflation from trend depend partly on the intensity of resource utilization in the economy--as approximated, for example, by the gap between the actual unemployment rate and its so-called natural rate, or by the shortfall of actual gross domestic product (GDP) from potential output. This relationship--which likely reflects, among other things, a tendency for firms' costs to rise as utilization rates increase--represents an important channel through which monetary policy influences inflation over the medium term, although in practice the influence is modest and gradual. Movements in certain types of input costs, particularly changes in the price of imported goods, also can cause core inflation to deviate noticeably from its trend, sometimes by a marked amount from year to year. Finally, a nontrivial fraction of the quarter-to-quarter, and even the year-to-year, variability of inflation is attributable to idiosyncratic and often unpredictable shocks.

 

Yellen concludes, after breaking down the inflation shortfall into its constituent parts, that the resource utilization component is now fairly small and will soon dissipate, having only the temporary components to worry about:

 

Although an accounting exercise like this one is always imprecise and will depend on the specific model that is used, I think its basic message--that the current near-zero rate of inflation can mostly be attributed to the temporary effects of falling prices for energy and non-energy imports--is quite plausible. If so, the 12-month change in total PCE prices is likely to rebound to 1-1/2 percent or higher in 2016, barring a further substantial drop in crude oil prices and provided that the dollar does not appreciate noticeably further.

Brainard, however, is not buying this story. Brainard's focus:

 

Although the balance of evidence thus suggests that long-term inflation expectations are likely to have remained fairly steady, the risks to the near-term outlook for inflation appear to be tilted to the downside, given the persistently low level of core inflation and the recent decline in longer-run inflation compensation, as well as the deflationary cross currents emanating from abroad--a subject to which I now turn.

 

While Yellen sees the risks weighted toward rebounding inflation, Brainard sees the opposite. Moreover, policymakers have been twiddling their thumbs as the world economy turns against them:

 

Over the past 15 months, U.S. monetary policy deliberations have been taking place against a backdrop of progressively gloomier projections of global demand. The International Monetary Fund (IMF) has marked down 2015 emerging market and world growth repeatedly since April 2014.

 

While all of you have been arguing about when to raise rates, the case for raising rates has been falling apart! As a consequence:

 

Over the past year, a feedback loop has transmitted market expectations of policy divergence between the United States and our major trade partners into financial tightening in the U.S. through exchange rate and financial market channels. Thus, even as liftoff is coming into clearer view ahead, by some estimates, the substantial financial tightening that has already taken place has been comparable in its effect to the equivalent of a couple of rate increases.

 

Brainard buys into the view that recent activity in financial markets has already tightened monetary conditions. Later:

 

There is a risk that the intensification of international cross currents could weigh more heavily on U.S. demand directly, or that the anticipation of a sharper divergence in U.S. policy could impose restraint through additional tightening of financial conditions. For these reasons, I view the risks to the economic outlook as tilted to the downside. The downside risks make a strong case for continuing to carefully nurture the U.S. recovery--and argue against prematurely taking away the support that has been so critical to its vitality.

 

Not balanced, but to the downside. That calls for different risk management:

 

These risks matter more than usual because the ability to provide additional accommodation if downside risks materialize is, in practice, more constrained than the ability to remove accommodation more rapidly if upside risks materialize.

 

In effect, the Fed can't cut rates quickly, but they can raise rates quickly:

 

...many observers have suggested that the economy will soon begin to strain available resources without some monetary tightening. Because monetary policy acts with a lag, in this scenario, high rates of resource utilization may lead to a large buildup of inflationary pressures, a rise in inflation expectations and persistent inflation in excess of our 2 percent target. However, we have well-tested tools to address such a situation and plenty of policy room in which to use them.

 

Brainard is willing to risk a rapid rise in rates. Yellen is not. Indeed, quite the opposite. Yellen desperately wants a very slow pace of rate increases:

 

 If the FOMC were to delay the start of the policy normalization process for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals. Such an abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession.

 

The more I think about it, the less I am worried about this issue. Suppose that the Fed needs raise rates at twice the pace they currently anticipate.  What does that mean? 25bp at every meeting instead of every other meeting? Is that really an "abrupt tightening?" Not sure that Yellen has a very strong argument here. Or one that would withstand repeated attacks from her peers.

 

I feel like I haven't scratched the surface on this speech, but I will cut to the chase: This is an outright challenge to the Yellen/Fischer view.

 

I think these three players are all products of their experience. Yellen received her Ph.D in 1971.  Fischer in 1969.  Both experienced the Great Inflation first hand. Brainard earned her Ph.D in 1989.  Her professional experience is dominated by the Great Moderation. 

 

I think Yellen wants to raise interest rates. I think Fischer wants to raise rates.  I think both believe the downward pressure on inflation due to labor market slack is minimal, and the Phillips Curve will soon assert itself. I think both do not find the risks as asymmetric as does Brainard. I think they believe the risk of inflation is actually quite high. Or, probably more accurately, that the risk of destabilizing inflation expectations is quite high. 

I think that Brainard knows this. I think that this speech is a very deliberate action by Brainard to let Yellen and Fischer know that she will not got quietly into the night if they push forward with their plans. I think that she is sending the message that they will not have just one dissent from a soon-to-be-replace regional president (Chicago Federal Reserve President Charles Evans), but a more-difficult-to-ignore Fed governor still voting when January 1 rolls around.

 

And now that Brainard has laid down the gauntlet, it will look very, very bad for Yellen and Fischer if their plans go sideways. This is very likely the last big decision of their careers. They know what happened to Greenspan’s legacy. I doubt they want the same treatment. Why risk their reputations when the cost of waiting is a 25bp move every meeting instead of every other meeting? Is it worth it? 

 

Brad DeLong suggested the Fed commit to one of two policy messages:

 

I must say that they are not doing too well at the clear-communication part. I want to see one of following things in Fed statements:

 

We will begin raising interest rates in December at a pace of basis points per quarter, unless economic growth and inflation fall substantially short of our current forecast expectations.

 

We will delay raising interest rates until we are confident that it will not be appropriate to return them to the zero lower bound after liftoff.

 

If we had one of these, we would know where we stand.

 

But Stan Fischer's speech provides us with neither.

 

I think that Fischer wants the first option, but knows Brainard’s views, and hence knows that December is not a sure thing if Brainard can build momentum for her position. Hence the muddled message. Brainard could be the force that drives the Fed toward option number two. An option closer to that of Evans and Minneapolis Federal Reserve President Narayana Kocherlakota. That would be a game changer.

 

Bottom Line: This is the most exciting speech I have read in forever. Not necessarily for the content. But for the politics. Evans and Kocherlakota are no longer the lunatic fringe. This could be a real game changer that shifts the Fed toward the Evans view of the world, with no rate hike until mid-2016. Brainard muddied further the already murky December waters. 

 

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