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Delta variant limiting production output

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Feds Kaplan speaks on Fox Business

Feds Kaplan

Fed’s Kaplan on Fox Business

  • The big “imponderable” is path of Delta virus.
  • So far the Delta virus has not had a material effect on mobility
  • Delta virus is limiting production output and slowing return to office
  • will be watching it Delta carefully
  • if Delta is having a more negative effect on GDP growth could cause me to adjust my views
  • a big economic variable is how quickly to get people vaccinated; right now in a negative trend as far as spread of Delta virus

The comments are modestly more dovish. NASDAQ futures have turned positive (implying gain of 15 points). S&P and Dow are still negative with the Dow implying a -72 point decline

On August 11, Kaplan in an interview on CNBC said:

  • If the economy unfolds as expected, in favor of announcing a plan a plan to taper at the September meeting and start tapering in October
  • CPI today was consistent with our outlook
  • There is not a demand problem in the US. The problem is supply
  • still expects broadening of inflation pressures into next year
  • Think the bond market is looking through these high inflation trends and expects the Fed to anchor inflation at 2%
  • Does not want Fed to run at this speed for too long and for Fed to have to take more aggressive action later on
  • There is in enormous amount of liquidity in the world and there is a tremendous bid in the 10 year sector
  • I am divorcing my decision making on adjusting purchases with the Fed funds rate. There is different set of criteria when looking at raising interest rates
  • My forecast is for a hike in 2022 but will make that decision as the economy progresses in 2022
  • Delta variant may prolong supply chain disruptions



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