Now that QE is history (for the fourth time) there are a number of misconceptions about what is taking place at the Fed. All the action is located at FRBNY, which only makes the tangled spread of accounting classifications that much worse. Interbank activity has never been much of a widespread, household concept, so the relevance to current circumstances only [...]
The Federal Reserve has an explicit 2% inflation target, whereby they pledge to maintain “loose” policy in order to achieve it. According to their preferred measure of such things, ill-suited as it is, the US economy has operated below that target since March 2012 – a stunning run of 30 consecutive months. The only other time where the US has [...]
As the FOMC gathered only a week after October’s unusual UST “experience”, they faced an oddly familiar problem. The entire focus, at least externally, has been on how to exit extraordinary “accommodation.” Yet there is clearly a market difference between 2013’s discussions in that direction and 2014’s. As noted previously, credit markets in 2014 seem to be keenly aware that [...]
Apparently St. Louis Fed President James Bullard is aiming toward the myth of the FOMC as “data dependent.” It wasn’t all that long ago that he suggested a pause in rate “normalization” as credit markets were signaling the “dreaded” disinflation appearance. A few weeks is all it has taken to change his mind and put the monetary world right back [...]
It began more than a week before the FOMC meeting, as eurodollars again anticipated what the mood would be surrounding whatever the FOMC might say. “Dollar” conditions had run down significantly where the entire curve shifted lower (looser) for the first two weeks of October as doubts grew about the economy in the US and pretty much everywhere else. Right [...]
As if it needed further clarification, the FOMC has gone its own way publicly against pretty much everything else because there is no other course that could even possibly end Hollywood-style. The constant reference to “slack” in the labor market is what gives this away. A potential reduction in labor slack would mean emphasis on inflation rather than unemployment. However, [...]
It might be a close race to decide which day of the month is the silliest, the Friday of the “jobs” report or the FOMC meeting (which are two-day events, but only the second day seems to count; and the FOMC meets every six weeks or so which means the Establishment Survey has a few months all to its self). [...]
Almost two weeks after the event, there is still more than a little nervousness about what took place on October 15 in UST trading – and for very good reason. Up to that point, proclamations about systemic liquidity degradations were just theoretical to most people. The reason was, and continues to be, that nobody seems to care about disruptions in [...]
While this morning’s post was more about longer-term implications of “dollar” changes, there are a couple of observations pertinent to the shorter-term that I think need consideration too. For whatever reason, whether it was, like September 4, 2013, an anticipation of countertrend “dovishness” on the part of the FOMC, the eurodollar market gained a sudden appreciation of the economic downside [...]
Yesterday, in the wake of some intense credit market drama, St. Louis Fed President James Bullard acknowledged the obvious. Quoted in the Wall Street Journal, Bullard showed just how upside down these “markets” have become. “Inflation expectations are dropping in the U.S., and that is something that a central bank cannot abide,” Mr. Bullard said. Referring to the process of [...]
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