Aside from the general hawkish tone in yesterday's FOMC minutes, the one line that caught traders' attention in the Fed report was the following:
Some members expressed concern that the likelihood implied by market pricing that the Committee would increase the target range for the federal funds rate at the June meeting might be unduly low
Moments ago Richmond Fed's Lacker piled on this point when in a speech on Bloomberg radio, he said that the market had misconstrued what the Fed meant in March and April, and had taken the wrong signal.
- FED'S LACKER: MKTS TOOK WRONG SIGNAL FROM FED IN MARCH AND APRIL
- FED’S LACKER: MARKET OVERESTIMATED HOW LIKELY WE WERE TO PAUSE
- LACKER SAYS HE'S COMFORTABLE WITH FOUR FED RATE HIKES IN 2016
- LACKER: DON’T EXPECT DOLLAR OVER REST OF YR TO RISK U.S. GROWTH
- FED’S LACKER: I SUPPORTED RATE INCREASE AT APRIL FOMC
- FED'S LACKER: STRONG CASE TO RAISE RATES IN JUNE
Which is odd because we don't recall Lacker actually dissenting with the Fed's decision not to hike.
Lacker also discussed Brexit, saying "if prospects looked uncertain enough and the direct expected consequences for the U.S. looked problematic enough I might be inclined to wait until July." And just like that Brexit is bullish for stocks as it means further rate hike delays.
Lacker added that the minutes did a good job of conveying the Fed's expectations.
Of course, it is not the market's fault for being so confused: it is headline such as these by Lacker's peers who now flip-flop weekly in their opinions depending entire on which side of 2,000 the "economy" is trading at any given day.
Here is Marketwatch, March 21, 2016
What is the take home here is that the Fed still refuses to take the blame for totally mucking up its communication policy which is no longer data dependent but entire Dow dependent. Recall what Randal Jenneke, Sydney-based fund manager at T. Rowe Price, said overnight: "There is this enormous policy uncertainty. The Fed has changed the goal posts so many times, everyone is confused. No one knows when they’re going to raise rates and no one knows what’s going to be the key thing to trigger the decision."
Spot on, and as long as the Fed refuses to accept its fault for having lost so much credibility it will only continue to lose credibility with every passing FOMC meeting in which it does nothing.