Bullard Calms Markets: "Everything Needs To Be Perfect" For Fed 4 Rate Hikes

Yesterday, what many strategists had believed would be a quiet release of minutes from the Fed's Jan. 31 meeting was, in reality, anything but. Once the market had deemed that the Fed had released another batch of neutral "goldilocks" minutes, the Dow powered higher, climbing 300 points before, upon closer reading, investors abruptly changed their minds and decided that four interest-rate hikes in 2018 (with Goldman even saying 5 are possible) - one more than the central bank had anticipated in December - was the most likely scenario. This sent stocks spiraling lower during the last 90 minutes of trading, forcing another close in the red.

So perhaps it's unsurprising, given the events of yesterday, that St. Louis Fed President (and FOMC non-voter in 2018) James Bullard appeared on CNBC's Squawk Box this morning to try and talk the market back from the ledge. Bullard is one of the most - if not the most - dovish regional Fed presidents, and is best known for casually hinting that QE4 is just around the corner any time stocks suffer a sharp selloff.

Granted he could not do that this time, but he did push as far as he could, and futures traders, desperate for good news after Goldman Sachs anticipated last night that the Fed could even hike rates five times this year, bid the market higher after the regional Fed president said that "everything would need to go perfectly" for the central bank to hike rates four times this year.

Bullard

Bullard told CNBC that the central bank needs to be careful raising interest rates this year, lest a policy mistake choke off economic growth and trigger the beginning of the next (long overdue) downturn. He cautioned that the Fed must continue to take its cues from the economy, which, despite the inflation furor triggered by signs of rising wages earlier this month, is still exhibiting only minimal price gains.

The Fed should shift from "reactive" to "proactive" only if inflation reaches or surpasses its 2% target with further price gains expected. The inflation story still has "a way to go", Bullard added.

Market-implied expectations for the number of rate-hikes in 2018 surged to new cycle highs (2.82 hikes) shortly before yesterday's minutes were released.

To Bullard's credit, the Fed still is completely clueless why wages aren't rising faster, as the excerpt from yesterday's minutes revealed:

During their discussion of labor market conditions, participants expressed a range of views about recent wage developments. While some participants heard more reports of wage pressures from their business contacts over the intermeeting period, participants generally noted few signs of a broad-based pickup in wage growth in available data. With regard to how firms might use part of their tax savings to boost compensation, a few participants suggested that such a boost could be in the form of onetime bonuses or variable pay rather than a permanent increase in wage structures. It was noted that the pace of wage gains might not increase appreciably if productivity growth remains low. That said, a number of participants judged that the continued tightening in labor markets was likely to translate into faster wage increases at some point.

And judging by all US equity futures turning green after Bullard's appearance, it appears that mission was again accomplished.

Comments

Pandelis Mementoil Thu, 02/22/2018 - 07:42 Permalink

it all sounded so certain and easy yesterday .... today .... yeah well.  thanks to Bulltard all is well again.

remember folks it is not about what the fed does but how is communicated .... which means is total bs, until they turn off the lights...

in words of Chuck Prince you got to dance if the music is playing, worry about chairs later...

In reply to by Mementoil

eclectic syncretist Pandelis Thu, 02/22/2018 - 08:04 Permalink

Inflation happens because the Fed counterfiats dollars, thus increasing the supply and decreasing the value. They've got the sheeple trained to think that inflation is rising prices when its really a weakening dollar, and the difference in the way of thinking about it is absolutely not a matter of semantics, its a matter of understanding how our financial system needlessly parasitizes the economy.

In reply to by Pandelis

Hal n back Pandelis Thu, 02/22/2018 - 08:06 Permalink

About mid year 5-6 years ago Bulliard was on CNBC  when YTD GDP was about 1% and he was then saying he still believed GDP would be over 3% for the full year.

He was Bulliarding then and now.

Thats putting aside that GDP does include a nice amount of inflation.

FBI Fed CIA, BLS, Census Bureau--all are infested with swamp bugs

In reply to by Pandelis

detached.amusement Mementoil Thu, 02/22/2018 - 07:50 Permalink

the fed was purposefully painted into a corner, whereby so long as the plebes accept their electoral fraud and dont say shit about deep staters in office, they can put off rate hikes ostensibly forever..

 

funny how all of a sudden "fundamentals" might matter, since the deep state got itself in trouble.

 

we're damned if they do, we're damned if they dont - FTFY

In reply to by Mementoil

TuPhat detached.amusement Thu, 02/22/2018 - 09:12 Permalink

The fed is losing control of interest rates anyway.  Eventually they will not be able to control anything and the crash will happen as planned and they can say they did everything they could to prevent it.  Onward to one world currency and a cashless society.  A blockchain type digital currency is in our future with complete control by the elite.  Some people are already buying into it with the false notion that it gives them financial freedom.

In reply to by detached.amusement

eclectic syncretist jmack Thu, 02/22/2018 - 08:08 Permalink

Fed masters don't want the dollar to go down the toilet too quickly. Its perceived value is the only power they have, and though they exist to exploit it until it vanishes back into the nothingness it came out of, they want to continue enjoying the ride as long as possible. The mere threat of rising interest rates props up the dollar, slowing its descent into forgotten history.....

In reply to by jmack

3LockBox eclectic syncretist Thu, 02/22/2018 - 08:28 Permalink

More Fed jawboning to help out their commercial buddies get their magic numbers for final day of options.

Use the minutes yesterday and then massage it with the release of statements like this.

Just a bunch of caca coming out of their mouth.

Total complete manipulation. It should be a freaking crime but is accepted. What a fraudulent gamed casino everything has become.

In reply to by eclectic syncretist

trueFacts Thu, 02/22/2018 - 07:15 Permalink

...we dont understand why wages haven't increased while we have 30 million aliens working on false ID, overstayed visas, and under the table cash  

William Dorritt Thu, 02/22/2018 - 07:32 Permalink

  "While some participants heard more reports of wage pressures from their business contacts over the intermeeting period,"

Translation: we can't get journeyman welders and other trades with documents to work for $9.50 an hour with zero benefits on construction projects.

 

"participants generally noted few signs of a broad-based pickup in wage growth in available data."

Translation: there is still a deep supply of illegals, H1bs and Green cards we can use to keep 100 million US citizens out of the work force keeping wages depressed.

 

  • Audit the FED
  • End all income and payroll taxes, they punish US workers and employers and savers.
  • End all immigration, 100 million out of the workforce and massive dislocation from automation on the way.
  • Deport 25-40 million illegals, wages rise and housing cost falls.
gmak Thu, 02/22/2018 - 07:38 Permalink

The FED says:
1. We can't tell when there are bubbles;

2. We can't reliably measure inflation and fudge the numbers; 

3. We don't know why wages aren't rising; but...

 

Trust us that we will be able to finesse interest rates for the best and optimal outcome for all parties in this universe.

Dogman57 Thu, 02/22/2018 - 07:44 Permalink

So how did all those years since 2009 work out. How much did savers lose out earning basically nothing on their savings?  National and corporate debt continues unconstrained.  Where is all the investment is business, not stock buy backs?