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Fed Mouthpiece "Explains" Epic September Fed Confusion

Tyler Durden's picture




 

In the wake of the Fed’s historic September “dovish hold”/”clean relent” which was significant for any number of reasons, but most especially because of what it said about the Fed’s apparent willingness to begrudgingly admit that it now has an intractable reflexivity problem (i.e. the FOMC is market dependent), every market participant was anxious to know one thing: what does Jon Hilsenrath think? 

Ok, not really.

But WSJ’s Fed whisperer is always good for a bit of Eccles propaganda and his take is also useful in terms of getting a read on what Janet Yellen and company are thinking and so, for whatever it's worth to you, we present the following Hilsy interpretation of the just-released minutes from the “most important” Fed meeting in recent history. Bear in mind that the FOMC is now completely trapped and confused, as that will help to explain any apparent inconsistencies in what passes for "logic" in PhD economist circles...

From WSJ:

Federal Reserve officials held off on raising short-term interest rates at their September policy meeting because they had nagging worries about when inflation would return to 2% after running below their official target for more than three years, according to minutes of the meeting released Thursday.

 

The Fed has twin goals of a robust labor market and low, stable inflation. At the last meeting, which they had earlier signaled could lead to the first interest rate increase in nearly a decade, officials decided they were near their goal of “full employment,” but weren’t yet convinced about inflation. Having approached the job market goal, the minutes suggest the prospective interest rate decision will depend on whether they become more confident inflation won’t continue to undershoot their objective.

 

“Many members said that the improvement in labor market conditions met or would soon meet one of the (Fed’s) criteria for beginning policy normalization,” the minutes said. “But some indicated that their confidence that inflation would gradually return to the (Fed’s) 2% objective over the medium term had not increased.”

 

(More to come)

Ok, sure. "More to come." We'll hold our breath for that but at the end of the day these minutes are just as useless as the last minutes because whereas previously, we didn't know how to interpret the Fed's thoughts due to a lack of commentary on China (which later proved to be critical), now, we don't know what they think about Septemeber's abysmal NFP print. 

In any event, one has to believe that the dovishness will only continue going forward because to be perfectly honest, there's no hawkish path out of this conundrum.

 

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Thu, 10/08/2015 - 14:12 | 6645346 kliguy38
kliguy38's picture

CNBS explaining the Fed speak now......tune in for laughs

Thu, 10/08/2015 - 14:17 | 6645370 Grandad Grumps
Grandad Grumps's picture

Nah, that would give them another viewer. Hopefully they go belly-up soon. They are dangerous and harm the world with their propaganda.

Thu, 10/08/2015 - 14:21 | 6645398 kliguy38
kliguy38's picture

good point....i flipped it back to dancing with the stars

Thu, 10/08/2015 - 14:36 | 6645477 aint no fortuna...
aint no fortunate son's picture

FULL "fulltime employment" or full PARTTIME employment with no benefits and shit pay?

Thu, 10/08/2015 - 14:38 | 6645488 NoDebt
NoDebt's picture

My new Grand Unified Theory of Everything:

They all know what's coming- they know they're trapped.  As much or more so than even the most paranoid of us on ZH.  THEY KNOW.  They're going to lie to the end.  As reality diverges further and further from their lies it will just become more and more obvious to more and more people (though nothing like a majority).  And that's how it will go until the next financial conflagration which WILL change the world financial landscape in a way 2008 almost did.

Thu, 10/08/2015 - 14:54 | 6645551 CheapBastard
CheapBastard's picture

Yellen needs a pair of those $300 yoga pants; peeples may respect her moar:

 

 

Inside the Fitness Boutique That Sells $300 Yoga Pants


http://www.bloomberg.com/news/articles/2015-10-08/inside-the-fitness-bou...

 

 

Thu, 10/08/2015 - 16:12 | 6646025 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

Good looking young nubile women of reproductive age do not need pants IMHO. Yoga pants are a waste of good money.

Thu, 10/08/2015 - 14:18 | 6645383 slaughterer
slaughterer's picture

In light of the FOMC minutes and Hilsenrath's summary, it seems that we are reminded once again that the Fed's inflation target is not yet met, in fact, far from being met.  I seem to remember Yellen stumbling through some weird logic tree regarding delayed inflation reactions int he press conference in September to cover upthe fact that the inflation target is not yet met, but could be met most likely even with a rate hike.  In any case, one could turn around and use the shortfall in inflation like Kocherlakota did today to justify NIRP and QE4 easily, which of course the media pundits are starting to catch onto e slowy but surely to enable their Wall Street buddies to end the year with a nice bonus.   

Thu, 10/08/2015 - 14:24 | 6645401 hedgeless_horseman
hedgeless_horseman's picture

 

 

One problem is that the banks that own and control The Fed truly believe that a period of 6%-8% inflation is the medicine they all need, regardless of the many side effects.  Fucking idiots.

Thu, 10/08/2015 - 14:19 | 6645391 Generic Property
Generic Property's picture

What's not to understand? This is confirmation of the China narrative. US inflation depends for a large part on how cheap China produces. China devaluation brings deflationary pressure to US consumers. I don't understand what you're saying.

Thu, 10/08/2015 - 14:13 | 6645351 bankonzhongguo
bankonzhongguo's picture

Who the fuck cares?

Thu, 10/08/2015 - 14:15 | 6645362 KnuckleDragger-X
KnuckleDragger-X's picture

Everybody who is skimming the market cream, starting with the mega-banks.....

Thu, 10/08/2015 - 14:16 | 6645366 Dr. Engali
Dr. Engali's picture

Hey Hilsy, you have a little splooge dripping off your chin there buddy. Why don't you go clean that up? 

Thu, 10/08/2015 - 14:18 | 6645380 Grandad Grumps
Grandad Grumps's picture

Unfortunately no one associated with the Fed has cred. When people stop believing in you, you just become a joke.

Thu, 10/08/2015 - 14:19 | 6645390 thismarketisrigged
thismarketisrigged's picture

WHY CANT WE RAISE RATES, ARENT FUNDERMENTALS SO AWESOME HERE IN AMERIKAAAA!!!?

Thu, 10/08/2015 - 14:24 | 6645416 Osmium
Osmium's picture

S&Pee hit 2k well done you fkrs!

Thu, 10/08/2015 - 14:44 | 6645516 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

Donald Rumsfeld thought it was appropriate for detainees to stand in a stress position when he ordered torture of human beings at blacksites. Frankly, when I took control of all the Central Banksters n' banks I thought it would be apropos if I engineered that the FED Chair, and every central banker in the entire world, would have to dance on the head of a pin, until they collectively drop like Depression Era dance competition indigents. And for good measure, at the end of Janet's little dance, she gets no prize unless you count her booking on Extraordinary Rendition Airlines as a win for Old Yeller.

Thu, 10/08/2015 - 14:46 | 6645527 adonisdemilo
adonisdemilo's picture

When they can't disguise the true uneployment numbers any more and inflation is very negative I wonder if they will be able to avoid the many lynch mobs intent on very, very justified retribution.
It's going to happen.
Can't wait.

Thu, 10/08/2015 - 14:52 | 6645547 polo007
polo007's picture

According to Macquarie Research:

https://app.box.com/s/bh0unh5y596z3ktwi6rwivmsnuyhwl1r

Equities – irrational exuberance?

In our latest commentary we ask whether equities are appropriately assessing risks or whether higher FICC volatilities are more rational. Both cannot be right.

Are equities reflecting fundamentals? Most leading and trade indicators seem to be highlighting that despite aggressive monetary easing by 20+ central banks, deflationary pressures remain strong and growth rates in both DMs and EMs are rapidly slowing. In response, FICC are signalling an elevated level of risk.

However, equity investors seem to be assuming maintenance of ‘goldilocks’: low rates & ample liquidity; slow (but steady) growth and low (but positive) inflation.

Who is right? We argued here that most leading indicators have lost their informational value as private sector no longer has any LT visibility, and hence survey-based responses frequently send misleading signals. Given that FICC investors tend to be intensive macro data users, they are highly susceptible to whiplashes of false signals. As long as public sector continues to dominate macro outcomes, FICC investors are at the mercy of unpredictable shifts, driven by CBs rather than fundamental drivers. Therefore, our traditional assumption— that whenever there is a conflict between FICC and equities, the former is almost always right— might no longer hold, as FICC investors are now just as ‘blind’ as equity investors. Hence, equities just might be right.

However, we are concerned on two counts: (a) global economy continues to reside on a de-facto US$ standard and the US is not generating enough US$ to enable continuing global leveraging (absent strong recovery or QE4, supply of US$ is falling at ~5% clip); and (b) efficacy of conventional monetary policies seem to be largely exhausted. As global velocity of money declines, incremental QEs required to grow liquidity are on an ever increasing scale (~US$1.5tr+ in ’16 and escalating to infinity). Hence, there is a need to re-assess nature of QEs.

We doubt that the alternative of CBs abandoning desire to regulate and ‘smooth cycles” and letting deflationary business cycle to reset itself is on the cards.

If conventional QEs lost potency and aggravate global deflationary pressures, why do equities assume that lack of tightening and further QEs would guide economies towards ‘goldilocks’? We believe that it is a simple ‘Pavlovian reflex’. In the past, this relationship worked because QEs were generally successful in temporarily reducing deflationary pressures. However, short of massive rise in monetary stimulus, it seems that incremental changes would no longer be able to achieve such an outcome. Are we ready for more extreme policies? The next stage is likely to be CBs directly funding fiscal spending, investment and consumption. However, to accept such a radical shift requires ‘accidents’ and a severe slowdown. Over 12-18 months, chances of both are high but low over ST.

Hence in the ST (3-6 months) we anticipate neither aggressive QEs (with at best limited efficacy) nor extreme unconventional policies. Therefore, as investors progress into ’16, supply of US$ is likely to continue contracting, deflating global demand and constraining liquidity. This would lead to regular bouts of volatility rather than goldilocks and could easily reverse current equity euphoria.

Hence, we are reluctant to back weaker EMs, and continue to play ‘safe’ by emphasizing countries with trapped local liquidity, some flexibility of monetary & fiscal policies and countries that do not excessively rely on commodities. This continues to tilt us towards India, China, Philippines and Taiwan and away from Indonesia, Malaysia and Thailand. We also continue to emphasize our ‘Quality & Stability’and ‘Sustainable Dividends’ portfolios. When would be the time for our ‘Anti-Quality’ portfolio? Probably sometime later in ’16-17.

Thu, 10/08/2015 - 15:52 | 6645919 loveyajimbo
loveyajimbo's picture

Yoda Yellen will either quit or drop dead from the stress of running this banker criminal scam called the Fed.

Thu, 10/08/2015 - 17:38 | 6646463 Implied Violins
Implied Violins's picture

Or she will suddenly develop some alarming stretch marks under her third chin. Lampposts may be involved.

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