Powell in a cloud of dust…

Once again I’m asking for the glory for our ever victorious army in its recent military offensive against terrorist forces in Syria. There are no many other members of the profession of arms who perform their duty with honour like Turkish soldiers.

This has been a day where we observed the details of Turkey’s offensive against U.S.-backed Syrian militia as well as different reactions from the world. However, I have noticed some important details watching the Fed Chair’s press conference the other night. The things he said concerns all of us.

In his press conference the other night, when Jerome Powell said, “Planned bond buying isn’t emergency stimulus”, he actually tried to cover the fact that he was giving direct support to bonds and bills market, thus in this way, transferring funds to government. It was an interesting detail indeed.

“We better not slack off…”

The Fed has significantly increased its balance sheet since August. But Powell says that Fed balance sheet growth is not quantitative easing. I honestly do not agree with him. That’s exactly what it’s doing, which could become a positive thing for everyone in the short term. In medium term, however, it may lead to some complications. So, we better get ourselves ready for new bubbles in Capital Markets and their inevitable blowing up.

Stating that uncertainties around trade, Brexit and other issues pose risk to the U.S. economic outlook, Fed Chair noted that inflation has been gradually firming over the past few months despite the fact that inflation remained below target. He also says said the recent job report is sign of continued strength in labour market. But, we were all surprised by a sudden change in his tone when we were about to be convinced that the US economy is doing going pretty well.

Citing slowing global growth and muted inflation, Powell said that there is no reason why the expansion can’t continue. With this sentence, all of the things he said before became almost meaningless; because in his latest press conference, Powell paved the way for a new rate cut despite the fact that he mentioned strong US economy and how the business world is content with interest rate levels.

As I said earlier, a new rate cut would not be detrimental to Turkish economy. On the contrary, it may ease the markets in short term. Monetary abundance may help this financially stressful world breathe a sigh of relief; however, achieving abundance without the full implementation of structural improvements would definitely cause many counties, including Turkey, to slack off.