If you had any confidence in your ability to understand The Fed's future course of action, Fed vice-chair Stanley Fischer just destroyed it in a speech in San Francisco [4] that beggars belief in its CYA hedgedness...
While we continue to scrutinize incoming data, and no final decisions have been made, we have done everything we can to avoid surprising the markets and governments when we move, to the extent that several emerging market (and other) central bankers have, for some time, been telling the Fed to "just do it."
Fed meetings are now 'getting interesting' as possible rate hike discussed
In the relatively near future probably some major central banks will begin gradually moving away from near-zero interest rates
All of this was said without a big "wink."
So let's break down the confusion:
First, this...
- FISCHER: FED HAS TAKEN NO FINAL DECISION ON TIMING OF LIFTOFF (ok makes sense, data-dependent and all that)
But...
- *FISCHER: SOME MAJOR CENTRAL BANKS TO RAISE RATES IN NEAR FUTURE (well The ECB, BoJ, PBOC aren't so that means The Fed will? But you just said you hadn't decided yet?)
Then this...
- *FISCHER: FED HAS DONE EVERYTHING IT CAN TO AVOID SURPRISING MKT (by telegraphing a rate-hike in December - just like you did in September - even though you 'surprised' everyone then and just seconds ago said you hadn't decided... and had)
And finally this...
- *FISCHER SAYS FOREIGN CENTRAL BANKERS HAVE TOLD FED 'JUST DO IT'
Ok, so greenlight from everyone else - it's on - do not be surprised... but then again we haven't decided yet so don't bet on it.
* * *
Is it any wonder that Gold and Treasuries were bid today as it becomes ever more clear that The Fed is entirely lost and a policy error is looming.
