Jackson Hole Post-Mortem: "Door Still Fully Open To September Lift Off"

Tyler Durden's picture

Curious why the S&P futures have opened down some 0.6%, wiping out the entire late-Friday ramp? The reason is that as SocGen summarizes it best, following the Jackson Hole weekend, we now know that despite Bill Dudley' platitudes "the door is still fully open to Fed liftoff in September."

Here is how SocGen describes a Fed whose posture still hints at a September rate hike:

Jackson Hole vs Market Consensus


Analysing the speeches and papers from Jackson Hole, we note several “gaps” to the market consensus. Top of the list, Vice-chair Fischer struck a slightly less dovish tone suggesting that all options remain open with respect to a September liftoff. New research presented, moreover, showed that US inflation is less influenced by FX rates than some in markets fear. BoE Governor, for his part, played down the China slowdown noting this did not yet warrant a change to BoE strategy. Vice President Constancio also sounded confident in the ECB’s ability to close the output gap and raise inflation. More worrying, RBI Governor Rajan warned that central banks should not be overburdened and noted mispricing of certain assets. Also notable was the apparent lack of discussion on what tools central banks have left to fight new downside risks; and this at a time when one of the more effective QE channels of emerging economies’ leverage expansion has lost its punch. A topic perhaps for the 4-5 September G20 in Ankara.


Door still fully open to Fed liftoff in September ...


Comments by Fed Vice Chair Fischer kept the door open to a September rate hike. Speaking Saturday, he noted that at “At this moment, we are following developments in the Chinese economy and their actual and potential effects on other economies even more closely than usual.” At the same time, he highlighted that “With inflation low, we can probably remove accommodation at a gradual pace. Yet, because monetary policy influences real activity with a substantial lag, we should not wait until inflation is back to 2 percent to begin tightening.”


Interestingly, while Fischer made reference to role of the dollar in potentially keeping US inflation low, new research from Harvard Economics Professor Gita Gopinath, (link here) suggested that the US economy is fairly “insulated” from foreign inflation/deflation pressures via exchange rates given that the bulk of US foreign trade in conducted in dollars. This is very much in line with the findings of our Chief US Economist, Aneta Markowska.


At present the market is pricing in a probability of just under 40% for a September rate hike, up from a low last week of 24% but still below our own baseline which sits above 50% and more dovish than our interpretation of the tone struck at Jackson Hole and recent data releases. Albeit that part of the Q2 GDP revision from 2.3% to 3.7% came from an inventory build, private demand was also robust. This week’s employment report is the key release ahead of the 16-17 September FOMC and we look for 250K. In addition to the economic data, financial conditions will play an important role in shaping the Fed’s liftoff decision; the recent stabilisation if confirmed should increase the odds.

* * *

Translation: while the Fed may or may not hike in September, the Fed itself does not know what it will do, less than three weeks until the September FOMC, but as we explained on Friday the higher the market rises, i.e., the looser financial conditions become, the higher the likelihood the Fed does hike in September after all... thereby forcing another sell off.

Good luck with that particular bit of circular logic.

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bnbdnb's picture

Nothing will change. The fed won't move until the world needs a hero.

Bossman1967's picture

The fed dealer of what the wall street junkies need one minute then they think its all ok and they take it back sounds like a junkie i once new that is now dead. How sad

PlayMoney's picture

Just a wild guess ...in November a rate hike will still be on the table for December?

kralizec's picture

The BS will continue until the lights go out...

Manthong's picture

And we have liftoff…


christiangustafson's picture

If we are entering a new Bear at last, then a sound reaming of the Bulls off their low-volume ramp would be in order this week.

If you're counting this at home, we would say that wave 4 targeted the (iv) of 3 area, so, yes, we saw a deep 4 late last week.

Now let's go set some new lows for 5 of 1, in the 1785-1800 SPX range.

Sudden Debt's picture

Yeah sure... and my wife went to bed 4 hours ago and I'm sure the door is still open for some good sundaynight sex...

msmith9962's picture

Finaly, someone uses an analogy I can understand.  Thank you.

aliki's picture

September liftoff?

sure, for a QE4 launch

credit to josh brown at CNBC - he finally broke-rank last week from the station that brings u "hope-ium" and said the only indicator the fed watches is the S&P 500.

buzzsaw99's picture

maybe they'll hike a whopping 11 bps

aliki's picture

lol - cud see the headline now:

"during the last month, the federal reserve raised the interest rate on the US-10 year by 11 basis points and the PBOC raised it by 25 basis points"

sam i am's picture

Will Popacalypse cause shitmageddon in Phila?


BurningBetty's picture

Well I mean, in this enviroment, and with the world neck-deep in debt the increase in rates with even the crappy 0,25% is probably equivalent of Paul Volckers boost in the 80s when rates hit 18%. I am just taking this one off the top of my head;

Interest rate of 1% today would probably be roughly 18% in the 80s. Give or take 25bp off todays equivalent and 200-300p off in 80s equivalent and you probably have a possible comparison match.

ebworthen's picture

Should be good for a 7 year cycle October crash.

If they actually do it that is why they will do it.

Clean the sheeple's 401K/IRA/Pension and any other "retirement" chips off the green felt, again.

Keltner Channel Surf's picture

"Curious why the S&P futures have opened down some 0.6%"

I assume it was to start another Sunday night panic leading to a favorable morning buy point for machines to take us back to their 20 DMA targets, which remain in force until a few more humans get back from vacation and change the instructions.

serotonindumptruck's picture

Colossal false flag in 3...2...1...

blown income's picture

.25% ....pussies..I remember in 2003 , bought a home $175k @5.20% and was ecstatic

same home today is fucking double!!! bring that shit back to 5% !!!

JOHNLGALT's picture
JOHNLGALT (not verified) Aug 30, 2015 6:37 PM

The rates will go up in Sept, Dec, March 2016, June, Sept, Dec, NO WAIT REALLY AND TRULY, cross my heart and hope to die, It will be 2017 March, June.


The rate rise will strengthen the dollar and we can get this thing finished with.  HA, HA,HA _JOHNLGALT.  p.s.  There seem to be a lot of John Galt’s out there working toward the same end.

Atomizer's picture

Jackalope Hole has loosened their anal mudflaps. Tenderness is used to regain lost trust. 


JamaicaJim's picture

I like your style sir....

well smote...

JamaicaJim's picture

God Speed...


no wait...

God DAMN you Squid!

Victor E. Overbanks's picture
Victor E. Overbanks (not verified) Aug 30, 2015 7:57 PM






Lift Off?

PlayMoney's picture

should just write the same press release and every month ...yeah what we said