Shifting winds

Lael Brainard gave a speech, Navigating Monetary Policy as Headwinds Shift to Tailwinds

Since the speech is mostly boilerplate with a catchy title, I´ll jump straight to the conclusion,

In many respects, the macro environment today is the mirror image of the environment we confronted a couple of years ago. In the earlier period, strong headwinds sapped the momentum of the recovery and weighed down the path of policy. Today, with headwinds shifting to tailwinds, the reverse could hold true.

She doesn´t mention that the “winds have shifted” several times in the past eight years. In fact, the latest shift from “head to tail” has been special in a negative way.

You may note from the chart that the 2015-16 headwind was the strongest, reducing the “plane´s” speed by the most. The ensuing tailwind appears to be the weakest of the group, with the “plane´s” speed climbing the least.

In other words, the “pilot” has to be careful and try to keep the “plane´s nose” from dropping!


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