Fed "Accidentally" Released Dovish Confidential Market-Moving Forecasts, Blames "Glitch"

First The 'unaudited' Fed leaks its FOMC minutes. Then they leak 'inside-information' to Nikkei's latest addition, Medley Global advisors (and remain "above the law" with regard consequences. And now, The Fed admits it leaked full blown confidential economic projections (due to a code glitch), whose summary assessment is shown below as per the leaked file.

While superficially, and as expected, the Fed is assuming a 1.26% fed funds rate in one year, suggesting about 3-4 rate hikes until then, with the first one according to the leaked documents taking place in Q3:

... the overall strength of the economy is well weaker, and thus more dovish, than many of the permabulls had expected.

As Bloomberg notes,

  • *FED SAYS IT INADVERTENTLY RELEASED STAFF ECONOMIC PROJECTIONS
  • *FED SAYS PROJECTIONS POSTED TO PUBLIC WEBSITE ON JUNE 29

The leaked projections were:

  • *FED STAFF PROECTIONS SHOW YEAR-END FED FUNDS OF 0.35% 2015
  • *FED STAFF PROJECTIONS SEE FED FUNDS AT 1.26% 4Q 2016
  • *FED STAFF PROJECTIONS SEE GDP 2.31% 2015, 2.38% 2016

And these are the key projections as revealed in the leaked file (ZIP file can be found here). Note that the Fed expects a long-term 10Y rate of 4.25%, and potential GDP output to renormalize by 2020.

 

Or in other words, quite more dovish than anyone expecting a strong, "escape velocity" surge in the economy had hoped for: certainly far weaker than what an imminent rate hike suggests.

The impact of the "glitch" on the bond market can be seen the moment it hit by this dramatic move in the 2Year:

 

As for the reason for the leak - simple - same as every other leak - a technical "glitch":

Economic projections prepared by Federal Reserve Board staff as background for the June 16-17, 2015, meeting of the Federal Open Market Committee (FOMC) were inadvertently included in a computer file posted to the Board's public website on June 29. Because the information has already been released, the Federal Reserve is today providing general public notification and making those projections more easily accessible on our website within the FRB/US model package (ZIP) data folder.

 

Approximately every three months, Federal Reserve Board staff update and publish on the Board's website a package of computer code of the Board staff's FRB/US model of the U.S. economy, including a set of illustrative economic projections based only on publicly available information.

 

On June 29, an updated package of code was posted that inadvertently included three files containing staff economic forecasts that are confidential FOMC information. Two files contained charts of the staff's projections for economic variables such as the unemployment rate, the core inflation rate, and gross domestic product growth as well as the staff's assumption for the path of the federal funds rate target selected by the FOMC. Another file contained computer code used to generate a table displaying staff economic projections.

 

The projections that were inadvertently released are staff projections that do not incorporate policymakers' views, including their views on monetary policy. Policymaker views were set forth in the monetary policy statement and projection materials released on June 17 and in the minutes of the June FOMC meeting and the Summary of Economic Projections published on July 8.

 

Consistent with the procedures in the FOMC's Program for Security of FOMC Information, this matter has been referred to the Board's Inspector General.

But do not worry - despite the fact that they cannot upload a zip file in a timely manner, they are fully in charge of the world's economic future.