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San Fran Fed Defends Rate Hike, Says Ignore Terrible Wage Growth Data
It is becoming increasingly clear that, come hell, high water, or dismal data, The Federal Reserve will raise rates in December whether the market likes it (which it will guarantee) or the economy doesn't (which doesn't matter after all).
A month ago, Stan Fischer dropped the first hint when he told Jackson Hole attendees that The Fed could ignore the inflation target because of transitory issues.
Fischer said there's "good reason to believe that inflation will move higher as the forces holding down inflation dissipate further." He says, for example, that some effects of a stronger dollar and a plunge in oil prices have already started to diminish.
Fischer added "The Fed should not wait until 2% inflation to begin tightening," thus making that data item irrelevant for deciphering The Fed's decisions.
Then, having warned of global turmoil weighing on her decision to raise rates, Yellen reversed position and brushed off any concerns about global uncertainty.
Yellen removed the "global economic developments" part as well:
Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term.
So no matter what happens overseas, all clear given for rate hikes.
And now, with the final nail in the coffin of data-dependent lies, The San Fran Fed just dismissed 'wage growth' as entirely irrelevent to future growth or inflation...
These results do not imply that wages and prices are unrelated. Certainly they are tied together in the long run, and wage data will surely contain some information for future price inflation. However, after incorporating information from prices and activity measures, the marginal additional benefit of using wage data appears small.
Fundamentally, the weak forecasting power of wages for prices suggests that unexpectedly high or low inflation could occur regardless of the recent behavior of wages.
Researchers have extensively studied how wage data might help predict future price inflation. The overall conclusion of the literature is that wages generally provide less valuable insight into future prices than some other indicators.
In fact, models that do not incorporate wages often result in superior inflation forecasts
Thus enabling The Fed to justify a December rate-hike no matter how bad the data they are so dependent on turns out to be... Which explains this chart...
As Dec rate-hike odds hit series record 52%... in the face of collapsing macro and micro data.
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"Wages are stagnant? Who gives a fuck. IT'S ALL ABOUT OUR INFALLIBLE MARKETS!!!11111"
I'm dreaming of a white red (Wall Street) Christmas.
<Buy the rumor, sell the news......just in time for Santa Claus.>
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Seriously. And for what Good reason?
Yo wit: Everybody keeps talking about the current "Recovery". Right?
A Recovery is the first, initial growth spurt, way above trend, when exiting a downturn.
Subsequent periods of growth, more in line with the longer term norms are referred to as "Expansions".
Has anybody but me noticed that Nobody Speaks about the Expansion, but ruminate on the quality or condition of the Recovery?
Lies. All illusions, warm breezes, falsehoods, temporal sleights of hand, ruminations and illogical conclusions drawn from personal biases and ego maniacal desires to impress ourselves.
These people at the Fed are riding first class on the Crazy Train
it all sounds very orthodox to me
Market being pumped in advance is indicator of upcoming lift off...that and my credit card company notifying us that their unpaid balance rates are going up from 19% to 24%...do you think they know something?
Or...is this all part of the propaganda to convince everyone that the Fed rate rise is just....around....the....corner...
According to the Fed, models without people are superior. No wonder the push for AI.
This Crazy Train is apparently the 300kph express variety.
Cecked out the [empty] stores this weekend. It is defintiely depressing to be in retail apparel bidniz.
Somehow, Barry's robust recovery is missing them.
The imminent inflation Fischer sees is the wall of money coming from China. His problem is that the timing isn't exact. THis makes it difficult to come up with a cover story/model. The problem will be justifying to Americans why the Chinese have purchasing power and we do not. All the mumblety is to conceal the flow of funds. Inflation without workers, eh?
They're either really trying to show they mean business - for reals this time, or... I wonder if the sudden 'tough-talk' in the face of obvious weakness has anything to do with the $dollar - and foreign policy, by extension?
Yeah, raise rates, destroy the EMs, buy their ASSets for pennies on the dollar, sounds like a plan to me.
What rate hike?
The one coming. Get ready, this time it will be a show.
Now we don't need anybody to work to have an economy? How about that!
Well.. i like to see feds INCREASE their rates. I dares yaa' !!
Lol, more guidance ? The management of expectations has never been easier ..