TSS Episode 139: J.P. Morgan’s Michael Feroli on Fed’s One Tool, Separation Principle and more
· 11.05.2023 · 17:35:02 ··· ··· Thursday ·· 4 (4)
DoubleLine Capital DoubleLine Deputy Chief Investment Officer Jeffrey Sherman and Portfolio Manager Samuel Lau welcome J.P. Morgan Chief U.S. Economist Michael Feroli to The Sherman Show. Mr. Feroli kicks the episode off by recounting his educational transition from philosophy to finance and his employment transition from working at the Federal Reserve Board, when Alan Greenspan was chair and Ben Bernanke was a board governor, to the private sector for J.P. Morgan (2:53). Mr. Feroli then addresses topics including the potential disconnect between financial markets and the real economy (5:42), the lag this cycle between the Fed’s interest rate hikes and their impact on the labor market (10:03), the interplay of financial stability and monetary policy in the Fed’s response to the banking crisis (17:03) and the possibility for immaculate (painless) disinflation (20:09). “Can we get back to 2% without a recession?” Mr. Feroli asks in regard to hitting the Fed’s annual inflation target. “The models would say probably not.”
Messrs. Sherman, Lau and Feroli also discuss, among other topics, what a slowdown in credit could mean for smaller businesses (28:06), fractional reserve and narrow banking systems (32:02), the hunt for a magic regressor signaling recession (41:27) and Mr. Feroli’s concerns over how the debt-ceiling standoff in Washington could go down differently this time – in a bad way (44:32). This episode was recorded May 4, 2023.
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