Jerome Powell, Federal Reserve Chairman
“The economy is beginning to move ahead with real momentum,” Powell said. “An episode of one-time price increases as the economy re-opens is not the same thing as, and is not likely to lead to, persistently higher year-over-year inflation,” he said. “When the time comes for us to talk about talking about it we’ll do that. But that time is not now,” he said. “We’ve had one great jobs report. It’s not enough. We’re going to act on actual data, not on a forecast, and we’re just going to need to see more data. It’s no more complicated than that.” If inflation were to move “persistently and materially above 2% in a manner that threatened to move longer-term inflation expectations materially above 2% we would use our tools to bring inflation expectations down to mandate consistent levels.”
Carl Tannenbaum, chief economist at Northern Trust
“I took away that not even any preliminary discussion of a change in policy is imminent,” said Tannenbaum. “He gave a spirited defense of the Fed’s view on inflation and employment. They are very happy with the course they are on and not likely to change it soon.”
Jerome Powell, Federal Reserve Chairman
“We’ve had one great jobs report, it’s not enough,” Powell said. “We’re going to act on actual data, not our forecast.” “We’re a long way from our goals,” he added. “We think of bottlenecks as things that in their nature will be resolved as workers and businesses adapt, and we think of them as not calling for a change in monetary policy since they’re temporary and expected to resolve itself,” Powell said. “We know the base effects will disappear in a few months.” “If we see inflation moving materially above 2 per cent in a persistent way that risks inflation expectations drifting up, then we will use our tools to guide inflation and expectations back down to 2 per cent. No one should doubt that we will do that,” he said.
In comments by the Federal Open Market Committee members
“Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened. The sectors most adversely affected by the pandemic remain weak but have shown improvement,” the committee said.
Tom di Galoma, a managing director at Seaport Global Holdings
Powell “made it pretty clear that they are a fairly long way away from tapering,” said di Galoma. “I think the Fed is still quite unsure of how the economy is going to be six months from here.” “With all the money that is being spent … it puts the Fed in a very difficult position to taper,” di Galoma said.
Patrick Leary, chief market strategist and senior trader at Incapital
“It’s just hard to know what transitory is,” said Leary. “I think the market is going to get impatient about the level of inflation and how long it might last, and it might be perceived by the market that that inflation is not transitory, causing a little bit of a revolt, so to speak, in the bond market,” Leary added.
In a note by Nikolaos Panigirtzoglou and team, JPMorgan Chase & Co. strategists
“The big improvement in funding ratios implies a high incentive” for “U.S. private defined benefit pension plans to lock in the recent gains in their funding position by accelerating their de-risking going forward.” That means “accelerating their buying of long-dated bonds and selling of equities.” “So public pension funds have less incentive to de-risk in general,” Panigirtzoglou wrote. “But they do face a problem. Their equity allocation is already very high and their bond allocation stands at a record low of 20%. So, from an asset/liability mismatch point of view they are under some pressure to buy bonds.”
Zorast Wadia, a principal at Milliman
“The main reason for the overall shift from equities into fixed income has had to do with the change in pension regulations,” said Wadia. “And as these pensions’ funding status have improved they have continued to shed equity risk — getting more and more into fixed income.”
Adam Levine, investment director of Aberdeen Standard Investment’s client solutions group
What corporate pension plans “are looking for is to be well funded, not necessarily to get strong returns,” said Levine. “It is possible that as rates rise, corporate pensions move enough to the fixed income that to some degree it counters the rise in rates. You can certainly make that case if the moves are big enough and the industry is big enough.”
On record defaults clouding India’s resilient bonds and equities
Sunil Subramaniam, managing director of Sundaram Asset Management Co
“One can’t expect there will be good news on the economy, good news on earnings and stock prices will go up,” said Subramaniam. “It is undoubtedly going to be a volatile period for the market.”
Vikas Goel, managing director and chief executive officer at PNB Gilts Ltd
“Markets are getting cautious on the credit side as economic growth is seen slowing down, raising concerns distressed debt may rise,” said Goel.