“The last duty of a central banker is to tell the public the truth.”
~ Alan Blinder, former Federal Reserve Board Vice Chairman
Submitted by Tyler Durden on 03/16/2016 14:02 -0400
With gold up 15% since The Fed hiked in December (and stocks lower) and the market pricing a hike today at just 4% (June 53%), it is not surprising that Janet panicced and folded again in the face of “unequivocally good” data based on what The Fed has said it monitors. Of course there were plenty of excuses:
- FED MEDIAN FORECAST IMPLIES TWO 2016 RATE HIKES VS FOUR IN DEC
- FED SAYS GLOBAL ECONOMIC DEVELOPMENTS CONTINUE TO POSE RISKS
- FED LEAVES RATES UNCHANGED AT 0.25%-0.5% AS EXPECTED
- FED: GEORGE DISSENTED IN FAVOR OF A RATE RISE TO 0.5%-0.75%
Not too dovish (upgrade uncertainty), not too hawkish (lowered rate hikes), a goldilocks statement – just a little more inflation and just a little less unemployment and just another month or two of near-ZIRP rates is what it takes for the world to get it all together. We are breathless in anticipation.
Before The Fed statement, June was at 53% probabilty of a rate-hike…
Since The Fed’s last “action” things have not quite gone as expected…
Additional headlines include:
- *FED: MKT-BASED INFLATION COMPENSATION MEASURES REMAIN LOW
- *FED SAYS RANGE OF DATA SHOW MORE STRENGTH IN LABOR MARKET
- *FED: ECONOMY EXPECTED TO WARRANT ONLY GRADUAL RATE INCREASES
- *FED FORECASTS SHOW SHALLOWER PACE OF RATE RISES IN 2017, 2018
- *FED: ECONOMIC ACTIVITY MODERATE DESPITE GLOBAL DEVELOPMENTS
Some of the highlights from what is a quite dovish statement, which notes that the data is strong and yet the Fed is unable to hike rates:
Information received since the Federal Open Market Committee met in January suggests that economic activity has been expanding at a moderate pace despite the global economic and financial developments of recent months. Household spending has been increasing at a moderate rate, and the housing sector has improved further; however, business fixed investment and net exports have been soft.
* * *
Inflation picked up in recent months; however, it continued to run below the Committee’s 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports.
And here is why: the chickening out moment, it is the “global economy’s” fault.
However, global economic and financial developments continue to pose risks. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee continues to monitor inflation developments closely.
Full redline comparison with the January statement below:
* * *
As a reminder, the last time we got a “hawkish, balanced” statement was October 2015… and this happened…
Said it before and will say it again… juicing the market has two benefits:
1. preserves Barky’s only positive legacy (stock market returns)
2. ensures victory for Hillary in November
Fucking C**t
Yellen: ‘Hopefully’ inflation is moving up
Gold up three times what stocks are up since the announcement.
Don’t forget Admin….. that’s “paper gold” is up since the announcement!!!
T-bill yields are still near 0.25%.
It was thus a foregone conclusion that no rate hike would occur.
Why is this so difficult?
Of course, it’s hilarious that no one notes the Fed Paradox: The economy is fine, but emergency measures will continue, even as stocks have gone up 200% since the 2009 lows.
The Fed doesn’t control the stock market.
If it did, 1930-32 would never have happened.
The Fed is just giving market participants what they think they want (and they want to rally at this moment so they think that’s what the Fed gave them.)
If the market was falling and the Fed did exactly what it did today, it would not rally the markets. It doesn’t work that way. Ditto for gold.
Markets are markets. They are not rational and they don’t respond consistently to any stimulus or news item. They are the very definition of a complex system, and therefore obey rules we only dimly suspect exist.
You’re better off watching two exponential moving averages and a couple momentum-style indicators if you want to guess what is next. All other attempts to predict are doomed to failure, unless you just have a 100% bullish bias, in which case most of the time you’ll be right (but when you’re wrong, you’ll get your ass handed to you.)
Markets spend more time going up than down, but downdrafts travel farther, faster.
The Fed keeps pouring credit into the Bond Ocean.
That works as long as the Bond Ocean remains placid (i.e., interest rates don’t rise.)
When the Bond Ocean was small, the Fed’s activities could have a fairly larger effect. Now that the Bond Ocean is larger than at any time in human history, the Fed paradoxically could add $100 billion in credit, but a rising interest rate could evaporate ten times that much value out of the total of Bond Ocean Value.
Sooner or later this will happen, unless you think trees grow to the sky and that interest rates will be near zero for the rest of eternity.
The Fed has to base its decisions on the real world, not the phony one that is presented to you in the MSM and government reports.
It knows that the only thing keeping the system together at all at this point is an inflated money supply based on artificially low interest rates, and if it raises them much -or maybe at all- the whole thing comes down.
Something they don’t want to have happen till Hillary is in office to take care of the resulting chaos in a decisive manner (but one most people will not like very much).
[img
[/img]