Ah, the Fed Minutes. If only they contained no Repetition, Hesitation, or Deviation, we’d be able to see the wood for the trees. For all the worry over September tapering, we know they want to withdraw monetary accommodation. It’s not even about when. It’s about what it means after that. The two main takeaways from the Minutes were:
1) ‘Several’ committee members ‘expressed confidence’ about the recovery. So that’s the majority, then. Even the minority who want to wait and see don’t doubt things are picking up.
2) However, they discussed ‘the potential for clarifying or strengthening… forward guidance’: ‘several participants were willing to contemplate lowering the unemployment threshold if additional accommodation were to become necessary’.
So, they don’t want rates to go up. This is why the period after tapering is more important than when they start. Once it begins, will the Fed really be able to persuade the market that it is NOT the thin end of the wedge?
Oh, forward guidance. Credibility is so key. Memo to new Fed chair – Remember: No Repetition, Hesitation, or Deviation…
Lowest non-holiday volume in 6yrs creates record high quote/trade ratio from the High Freq guys. Who’s trading? #doom
Extremely overvalued, overbought, overbullish conditions for US stocks? If rates rise, history says sell. http://bit.ly/1aRETED
Mark Carney’s first Treasury Select Committee hearing earlier this year was remarkable for one thing: his obsession with communication. The success of the Bank of Canada’s so-called ‘contingent commitment’ was taken up with aplomb by the Fed, and now Carney brings it to the BoE with ‘forward guidance’. Even the ECB want to join the party.
They should be wary. Last night’s Fed statement has been pored over for exactly what the inflation/unemployment targets mean – does disinflation dominate? How more dovish is “modest” than “moderate”? We might know that Esther George is less dovish than James Bullard, but what does dovish even mean these days? Taper later:? Taper then reverse? Butcher, baker, candlestick maker? We’ve gone from gnomic Greenspan to verbal diarrhoea Bernanke, and are none the wiser.
The trouble in this information age is that the more we read, the more confused we become. Instead of stepping back and trusting our judgement, we dive in further in a desperate bid to find the silver bullet of a detail.
It’s time to stop listening to the central bankers, and take a view on the data. I know, it’s tough to believe the world might be recovering. But it is. Sure, it’s not going in a straight line, but even European growth is picking up (check out those PMIs). As Frankie says, Relax.
Let’s kick things off with a brief introduction. I’m a petite blonde working in the City of London (well, Mayfair to be exact) that has a view or two on events moving financial markets. My background is foreign exchange. No, not selling you holiday money (although perhaps we can come to some arrangement on that should you need it, I’ve currently got some rubles lying around), but dealing in one of the oldest and most liquid markets in the world. It’s the place where macro comes to play, as well as a wonderful embodiment of mad market sentiment, even though the machines are ever-present. If you’ve ever heard the phrase, “Yours/Mine shag in the bill and ben”, you’re in the right place. And if you haven’t, hopefully you’ll still find these outpourings useful. Or possibly just amusing.