While Janet Yellen vocally denied Donald Trump's allegation that the Fed is political, and is "keeping interest rates intentionally low for the Obama administration", an unexpected supporter for Trump "conspiracy theory" emerged overnight when JPM's chief global strategist, David Kelly slammed the Fed, telling CNBC that the Fed, by not hiking rates again, is "doing long-term harm to the economy by not hiking interest rates." The perplexed strategist added that "the economy has hit every target they have set. And we've got an inappropriate level of interest rates which is distorting asset markets, blowing bubbles and will eventually end up in inflation. They're imposing long-term harm for no short-term good here."
Well, maybe not quite: for a quick glimpse of the "short-term good" just look at any stock ticker today: everything is green, as the VIXplosion continues to drag volatility to an 11-handle, unleashing a risk-parity/CTA buying spree as noted earlier.
But the punchline in Kelly's angry rant emerged when the JPM analyst explained why he thinks the Fed did not hike: as CNBC summarized, "he believes there is an "unspoken" reason for the Fed's decision — the presidential election in November."
"If they had come out and hiked today and if we've had some sort of tantrum in the markets which amounted to a big sell-off in the stock market that could have had a political effect in this election." To which Dianne Swonk added "and they already are a political pinata" leading to David Kelly confirming "Well they are."
Watch the exchange below, with the key segment starting at the 2:30 minute mark: