Federal Reserve Chair Jerome Powell referenced the dramatic price fluctuations in the U.S. Treasury market from October 2014 as he opened the 2024 U.S. Treasury Market Conference on Thursday. Powell, who recently made a bold move by cutting the benchmark interest rate by 0.5%, had sparked speculation that he might address the current state of the U.S. economy. However, he only delivered a brief opening statement through a pre-recorded video.
During the conference, organized by the New York Federal Reserve, Powell’s remarks via video focused on the lasting impact of the 2014 Treasury market volatility. He explained that the market turmoil a decade ago and the subsequent finding from a government working group helped shape the conference’s ongoing discussions. He noted that the significant fluctuations in Treasury prices during that short period heightened their awareness, and the inter-agency working group report shed light on how much the market structure had changed.
Powell emphasized the importance of cooperation and communication among the five institutions involved in the working group: the Treasury Department, the Federal Reserve Board, the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the New York Federal Reserve. He noted that the value of this collaboration was reaffirmed during the disruptions caused by the COVID-19 pandemic.
Powell described the U.S. Treasury market as “the deepest and most liquid market in the world,” essential not only for meeting federal funding needs and effectively implementing monetary policy. He reaffirmed the Fed’s commitment to ensuring the market remains strong and efficient.
Meanwhile, Bloomberg reported on Wednesday that Powell’s standing within the organization has strengthened following the “big cut.” Initially, few anticipated such sharp reductions this year. However, during the Federal Open Market Committee meeting on September 17 and 18, 11 of the 12 voting members supported a 0.5 percentage point cut. Bloomberg described this as a victory for Powell, enhancing his ability to steer the economy. Mark Spindel, the founder of Potomac River Capital, remarked, “The chair always has enormous power. “here is a clear success story in Powell’s ability to get all but Bowman on board, and he is a more powerful chairman now.”
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