Fed Mouthpiece Reads "Liftoff" Tea Leaves

Tyler Durden's picture




 

Last month, in what will likely be viewed in hindsight as an ill-fated attempt to begin the long and painful process of normalizing monetary policy, the Fed "went there." Janet Yellen raised rates. 

Investors were meant to take solace in the FOMC's use of the term "gradual" to describe the trajectory for rates going forward, as well as from the apparent unanimity, but as is becoming more clear with each passing week, "liftoff" was a policy mistake and may well go down as the worst timed rate hike in history. 

On Wednesday we get a peak into the minds of the Eccles cabal with the release of the December meeting minutes. Here to read the tea leaves is the incomporable Jon Hilsenrath.

*  *  *

Via WSJ

Federal Reserve officials expressed glimmers of trepidation as they decided at a mid-December policy meeting to raise short-term U.S. interest rates after keeping them near zero for seven years.

 

Though the decision to raise rates was unanimous, some officials expressed concern about lingering low inflation and the stifling effects on the U.S. economy of a strong U.S. dollar and slow growth overseas.

 

“Because of their significant concern about still-low readings on actual inflation and the uncertainty and risks present in the inflation outlook, (officials) agreed to indicate that the (Fed) would carefully monitor actual and expected progress toward its inflation goal,” the Fed said in minutes of its Dec. 15-16 policy meeting released Wednesday.

 

Some officials said they wanted to see confirmation that inflation was actually rising as they looked forward to additional rate increases in 2016, the minutes said. Some also said it was a “close call” as to whether they should move in December.

 

Inflation has run below the Fed’s 2% goal for 3½ years.

 

The Fed tries to keep inflation near that goal to diminish disturbances to the economy. Persistently low readings since the financial crisis suggest underlying weakness in overall economic activity, even though employment has risen and the jobless rate declined.

 

In theory, inflation should pick up as joblessness falls and slack in the economy diminishes. With that in mind, “nearly all” of the Fed officials in the room at the meeting had become “reasonably confident” inflation would rise in the months ahead, the minutes said. Months earlier, the Fed had set “reasonable” confidence on inflation as a benchmark for deciding to raise rates.

 

Still, officials pointed to factors that could throw their inflation outlook off course: Additional declines in oil prices could further weigh on inflation readings, as could continued appreciation of the dollar.

 

“Although almost all still expected downward pressure on inflation from energy and commodity prices would be transitory, many viewed the persistent weakness in those prices as adding uncertainty or imposing important downside risks to the inflation outlook,” the minutes said.

 

The Fed said at the meeting and reiterated in its minutes that officials planned to move gradually on additional interest-rate increases because of these and other uncertainties.

 

They have tentatively penciled in four rate increases in 2016, according to projections they made public in December. The minutes emphasized their intention to take a go-slow approach.

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Wed, 01/06/2016 - 14:13 | 7005885 Hitlery_4_Dictator
Hitlery_4_Dictator's picture

SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. SUCH A FAILURE. 

Wed, 01/06/2016 - 14:17 | 7005915 Bunghole
Bunghole's picture

You need a girlfriend and a life.

Wed, 01/06/2016 - 14:39 | 7005988 knukles
knukles's picture

I can see it now.  Max Waters asking Janet deep penetrating questions at the next House Financial Services Committee meeting.  Such as; "What a nice hair do!  Did you get it done at Obie's over in Georgetown?"  Or: "Did you give any consideration to the impact on phone bills for underprivileged ObammiePhine users before deciding to raise rates which will raise all prices and tip Guam over, again?"

                         Fucking Awesome!

                      'Splain that away, Janet!

Janet:  "OK, so it was a wrong decision, Max, if I may call you Max, but we'll just seasonally adjust it away.
Max:    "Oh, I do hate cold winters.  Thanks, Janet"

 

          Aaaaaarararaaagagagaggahhhhhhh!

PS, Bunghole.  Hillary needs a girlfriend and a life, too, you know.  She's taking the BOLD step of ignoring The Donald.  Shit's gonna work like a charm.

Wed, 01/06/2016 - 15:10 | 7006186 KesselRunin12Parsecs
KesselRunin12Parsecs's picture

  "Hillary needs a girlfriend and a life, too, you know."

 

I actually disagree... I think THEY ALL need a DEATH.

Wed, 01/06/2016 - 14:18 | 7005920 froze25
froze25's picture

I would love to see in the minutes one day, "Jannet what the hell are you talking about thats not what we just discussed. Oh shit this is going to be in the minutes..."

Wed, 01/06/2016 - 17:27 | 7007042 BullyBearish
BullyBearish's picture

The "Panic" of 2007/8 now looks a lot like the panics that brought us the federal reserve in 1913...read the following and compare what has been done in the past 8 years and conjecture what is coming over the next 8 years of Hitlery's term:

 

To convince Congress and the public that the establishment of a banking cartel was, somehow, a measure to protect the public, the Jekyll Island strategists laid down the following plan of action:

1. Do not call it a cartel nor even a central bank.

2. Make it look like a government agency.

3. Establish regional branches to create the appearance of decentralization, not dominated by Wall Street banks.

4. Begin with a conservative structure including many sound banking principles knowing that the provisions can be quietly altered or removed in subsequent years.

5. Use the anger caused by recent panics and bank failures to create popular demand for monetary reform.(TBTF/DoddFrank/Mark2Fantasy/Derivative Continuance)

6. Offer the Jekyll Island (the federal reserve) plan as though it were in response to that need.

7. Employ university professors to give the plan the appearance of academic approval.(Princeton's Ben Bernanke)

8. Speak out against the plan to convince the public that Wall Street bankers do not want it

Wed, 01/06/2016 - 14:15 | 7005897 KnuckleDragger-X
KnuckleDragger-X's picture

There are a few who didn't drink all their Kool-aid apparently. The next meeting should be fascinating in a train wreck kind of way. Especially if the market keeps going the wrong way.......

Wed, 01/06/2016 - 14:16 | 7005907 Skeeterworborton
Skeeterworborton's picture

i don't belive it was a mistake...depends on who's shoes your standing in...

Wed, 01/06/2016 - 14:16 | 7005910 Dr. Engali
Dr. Engali's picture

Translation: After successfully scaring mom and pop out of the "markets" and stealing their savings it's time to walk back our rhetoric so we can eventually get them back in to steal moar.

Wed, 01/06/2016 - 14:20 | 7005935 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

A strong US dollar highlights US weakness, abject fear on the part of CB, and systemic fraud. Where do you go from here, Narco Ponzi Casino Crony Capitalist W  A  N  K  E  R  S ?

 

Note: United States of America has bottomed out at the top.

Wed, 01/06/2016 - 14:20 | 7005936 The Saint
The Saint's picture

Definately a "Fed Error" soon to be compounded due to elite stubborness.

Wed, 01/06/2016 - 14:21 | 7005939 Dre4dwolf
Dre4dwolf's picture

Its not dollar strength that is killing the economy its govt regulation , laws and policy and fractional banking.

Wed, 01/06/2016 - 14:24 | 7005954 Iocosus
Iocosus's picture

I love my Jewish friends, but why are they always heads of the Fed and Treasury?

Wed, 01/06/2016 - 16:26 | 7006659 besnook
besnook's picture

if you listen to them it is because they are brilliant. the real reason is obviously a fix. in other words, guess who your boss is.

Wed, 01/06/2016 - 16:55 | 7006876 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

Because they are the only individuals doing God's work, and God's only begotten son was a Jew favorite glorified in the Bible(tm).

Ergo, Blankfein is a Jew doing God's work at Gubbermint Sachs for the benefit of all the non-Jews in the World.

Wed, 01/06/2016 - 14:35 | 7005994 orangegeek
orangegeek's picture

And in conclusion, FUCK YOU YELLEN!!

Wed, 01/06/2016 - 15:07 | 7006165 cheech_wizard
cheech_wizard's picture

and FUCK OBAMACARE...

 

Wed, 01/06/2016 - 14:39 | 7006012 the grateful un...
the grateful unemployed's picture

the only disagreement was probably the how and not the why. if the policy decision would have been mostly jawboning there might have been more consensus. as it stands the fed committed 400b of money out of thin air to the banks. if the policy had no teeth it wouldnt work, and the fed would suffer a greater loss of credibility. i assume the dissenting opinions were okay with loss of credibility. the fed is going to have to fight its way out of this corner, they cant walk away and say poof let the free market do its thing. for right now the grownups are in charge, they dont need complementary data to continue raising rates. the dissenters dont have a leg to stand on, since every rate hike means more billions of dollars on the banks balance sheets. raise rates and supply liquidity.

Wed, 01/06/2016 - 14:43 | 7006039 Janet Shalom Be...
Janet Shalom Bernanke's picture

Fed is running out of runway.

https://www.youtube.com/watch?v=PytkwzGk1RI

Wed, 01/06/2016 - 14:49 | 7006072 hound dog vigilante
hound dog vigilante's picture

The Fed is going to REVERSE it's forecast/policy by the end of Q2.

Which begs the question, "At what point does the Fed lose ALL credibility?"

 

 

Wed, 01/06/2016 - 14:55 | 7006094 nope-1004
nope-1004's picture

I believe they don't have any credibility left but because they own the media and markets, public opinion and credibility of the Fed are meaningless.

They control futures, press releases, WSJ op-eds, etc....

This is monetary propaganda at its finest.

Wed, 01/06/2016 - 15:58 | 7006489 hound dog vigilante
hound dog vigilante's picture

true enough.

i often look at the US economy + Fed from an international perspective (via colleagues/experience abroad) and for the most part i get positive/optimistic views, which always surprises me... because those same people/places overseas continually shit on US politics/people/culture, but ask them about the economy/$USD and everything is sunshine & unicorns.

they love the perceived global security blanket we've provided, but they hate the US taxpayers who've paid for it...  *sigh*

 

Wed, 01/06/2016 - 16:02 | 7006502 surf@jm
surf@jm's picture

For those who worship at the altar of FED governance, I dare you to show me a way to prick a bubble, so it gradually deflates......

Wed, 01/06/2016 - 17:00 | 7006902 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

If I showed you how to deflate bubbles I would have to kill you immediately afterwards, and that is not something I would be willing to do because then I would be just like the CIA, FBI, and municipal police.

Wed, 01/06/2016 - 16:13 | 7006587 Jack4952
Jack4952's picture

"Though the decision to raise rates was unanimous, some officials expressed concern about lingering low inflation and the stifling effects on the U.S. economy of a strong U.S. dollar and slow growth overseas."

Are they INSANE ???? The government CPI figures are total NONSENSE!! ANd the Fed knows it!!!!  (The Fed and each of its regional banks have their own people who calculate the REAL CPI  - the REAL inflation rate !!!!)

The Government's formula for calculating the CPI was changed during the Clinton administration to make inflation appear to be LOWER. The calculations now "adjust" for QUALITATIVE changes in products people buy, along with the ACTUAL PRICE you paid (e.g., you new computer may cost you a lot MORE in dollars (even keeping the dollar value constant at the 1991 level) but the computer can do so much more; THUS the government calculates that your NEW computer cost you LESS. 

The Government's new (1991) formula for calculating the CPI also EXCLUDES such items as FOOD, RENT, GASOLINE, and several other "everday items". Just go to the supermarket and check out the prices! (I presume that you do eat and buy your own food.)

John Williams (at www.ShadowStats..com) calculates and compares the CPI usiing BOTH the pre-1990 formula and the post-1991 formula. His resullt: While the government CPI is now calculated to be about 0.2 percent, using the pre-1991 formula inflation is actually around 4.1%.

And HOW OFTEN do ou buy a new refrigerator, or clothes dryer, clothes washing machine, new car (included in the new CPI formula) compared to FOOD, GASOLINE, TAXES, MEDICINES, etc. (NOT counted in the new CPI formula).

The sad point is that the Fed KNOWS that these new CPI calculations by the government are WRONG !!! But the Fed Chairman (now Janet Yellen) "serves at the pleasure of the President" - meaning she is going to say and do what the President wants, if she wishes to remain in her office. But all of the Fed officials KNOW the truth, especially at the regional Fed banks, - which is why some members of the FOMC argued for a LARGER increase in the rates!   

Check out www.ShadowStats.com  !!!  

              You will be glad you did!!! Even if you do NOT pay for a subscription, the FREE information on the web site is quite valuable.

By the way, according to ShadowStats.com, the REAL unemployment rate is about 23.5%; and NOT the government's figure of around 5%!  (The government simply IGNORES people who have, out of frustration, given up looking for work OR who do NOT report to the unemployment office each week - even if their unemployment benefits have run out !!! And over 90% of all new jobs have been part-time, low-paying "service sector" jobs. "Would you like fries with that?" Further, if a person works 3 jobs to make ends meet, he is counted as 3 people employed !!!



 

Wed, 01/06/2016 - 16:13 | 7006588 Jack4952
Jack4952's picture

"Though the decision to raise rates was unanimous, some officials expressed concern about lingering low inflation and the stifling effects on the U.S. economy of a strong U.S. dollar and slow growth overseas."

Are they INSANE ???? The government CPI figures are total NONSENSE!! ANd the Fed knows it!!!!  (The Fed and each of its regional banks have their own people who calculate the REAL CPI  - the REAL inflation rate !!!!)

The Government's formula for calculating the CPI was changed during the Clinton administration to make inflation appear to be LOWER. The calculations now "adjust" for QUALITATIVE changes in products people buy, along with the ACTUAL PRICE you paid (e.g., you new computer may cost you a lot MORE in dollars (even keeping the dollar value constant at the 1991 level) but the computer can do so much more; THUS the government calculates that your NEW computer cost you LESS. 

The Government's new (1991) formula for calculating the CPI also EXCLUDES such items as FOOD, RENT, GASOLINE, and several other "everday items". Just go to the supermarket and check out the prices! (I presume that you do eat and buy your own food.)

John Williams (at www.ShadowStats..com) calculates and compares the CPI usiing BOTH the pre-1990 formula and the post-1991 formula. His resullt: While the government CPI is now calculated to be about 0.2 percent, using the pre-1991 formula inflation is actually around 4.1%.

And HOW OFTEN do ou buy a new refrigerator, or clothes dryer, clothes washing machine, new car (included in the new CPI formula) compared to FOOD, GASOLINE, TAXES, MEDICINES, etc. (NOT counted in the new CPI formula).

The sad point is that the Fed KNOWS that these new CPI calculations by the government are WRONG !!! But the Fed Chairman (now Janet Yellen) "serves at the pleasure of the President" - meaning she is going to say and do what the President wants, if she wishes to remain in her office. But all of the Fed officials KNOW the truth, especially at the regional Fed banks, - which is why some members of the FOMC argued for a LARGER increase in the rates!   

Check out www.ShadowStats.com  !!!  

              You will be glad you did!!! Even if you do NOT pay for a subscription, the FREE information on the web site is quite valuable.

By the way, according to ShadowStats.com, the REAL unemployment rate is about 23.5%; and NOT the government's figure of around 5%!  (The government simply IGNORES people who have, out of frustration, given up looking for work OR who do NOT report to the unemployment office each week - even if their unemployment benefits have run out !!! And over 90% of all new jobs have been part-time, low-paying "service sector" jobs. "Would you like fries with that?" Further, if a person works 3 jobs to make ends meet, he is counted as 3 people employed !!!



 

Wed, 01/06/2016 - 16:15 | 7006595 Jack4952
Jack4952's picture

I apologize for the DOUBLE POSTING.

I do not know why that happened.

Do NOT follow this link or you will be banned from the site!