With gold up 15% since The Fed hiked in December (and stocks lower) and the market pricing a hike today at just 4% (June 53%), it is not surprising that Janet panicced and folded again in the face of "unequivocally good" data based on what the "Dow Data Dependent" Fed has said it monitors. Of course there were plenty of excuses:
- FED MEDIAN FORECAST IMPLIES TWO 2016 RATE HIKES VS FOUR IN DEC
- FED SAYS GLOBAL ECONOMIC DEVELOPMENTS CONTINUE TO POSE RISKS
- FED LEAVES RATES UNCHANGED AT 0.25%-0.5% AS EXPECTED
- FED: GEORGE DISSENTED IN FAVOR OF A RATE RISE TO 0.5%-0.75%
Not too dovish (upgrade uncertainty), not too hawkish (lowered rate hikes), a goldilocks statement, with just a little less inflation and just a little less GDP growth, and just two more quarter of near-ZIRP rates is what it takes for the world to get it all together.
Before The Fed statement, June was at 53% probabilty of a rate-hike...It collapsed after
Since The Fed's last "action" things have not quite gone as expected...
Additional headlines include:
- *FED: MKT-BASED INFLATION COMPENSATION MEASURES REMAIN LOW
- *FED SAYS RANGE OF DATA SHOW MORE STRENGTH IN LABOR MARKET
- *FED: ECONOMY EXPECTED TO WARRANT ONLY GRADUAL RATE INCREASES
- *FED FORECASTS SHOW SHALLOWER PACE OF RATE RISES IN 2017, 2018
- *FED: ECONOMIC ACTIVITY MODERATE DESPITE GLOBAL DEVELOPMENTS
Some of the highlights from what is a quite dovish statement, which notes that the data is strong and yet the Fed is unable to hike rates:
Information received since the Federal Open Market Committee met in January suggests that economic activity has been expanding at a moderate pace despite the global economic and financial developments of recent months. Household spending has been increasing at a moderate rate, and the housing sector has improved further; however, business fixed investment and net exports have been soft.
* * *
Inflation picked up in recent months; however, it continued to run below the Committee's 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports.
And here is why: the chickening out moment, it is the "global economy's" fault.
However, global economic and financial developments continue to pose risks. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee continues to monitor inflation developments closely.
Full redline comparison with the January statement below:
* * *
As a reminder, the last time we got a "hawkish, balanced" statement was October 2015... and this happened...