Perhaps one of the most anticipated FOMC announcements of all time. I would add, that replacing the word “patient” with Janet’s press conference explanation that she would not lose “patience”, was well worth my wait.
The Fed’s statement had something in it for everyone. Stocks took off as did precious metals, oil, bonds but the dollar flash crashed.
We learned: job growth is strong (if you’re a bartender or waitress and not an oil patch worker). Inflation is low, mainly due to the falling oil prices. (no mention of why the gas savings were not being spent). 2% inflation should be achieved sometime in 2017 (lucky for President Clinton). The economy has moderated somewhat (moderation is defined by the collapse of the majority of economic indicators – save the stock market).
The Fed noted that export growth has weakened and coincidentally repeated that international developments had to be taken into account.
Bundle it all together and the boys and the girls of the Fed have once again confirmed what yours truly has been proclaiming for months…
No interest rate increase now.
But maybe later! Hmmm
There will be many words written, discussed and analyzed before the Fed dust settles. However, what will singularly only be discussed on MacroProfit is why the most anticipated announcement was all “sound and fury signifying nothing”.
Janet Yellen and co-incidentally her husband, George Akerloff, are both Keynesians who believe that “economic markets (capitalism) are fundamentally flawed and need government regulation to function correctly”. Yellen, with academic credentials from Brown, Yale, Harvard, London School of Economics and the University of California at Berkeley, is grounded in the belief that inflation, through lower interest rates, is needed to achieve economic growth and thus reduce unemployment. The inability to create that inflation must be great for her sex life as deflation (a Keynesian impossibility) must keep her up every night (Did I actually say that?).
Yellen’s claim to fame, ostensibly, was her foreseeing, as President and CEO of the Federal Reserve Bank of San Francisco, the subprime mortgage crisis more accurately than her peers.
It could be compared to the passengers in the front of the Titanic recognizing trouble before those passengers in the back of the Titanic.
Did anyone really believe that without any indication of rising inflation, oil prices included and going lower, that the dyed in the wool Keynesian would have an epiphany and become an Austrian?
That would almost be like the youngster, Barack Obama, raised by a Communist grandmother and mentored by a Communist Advisor declaring for Capitalism. A student Barack Obama totally associating with fascists, radicals and socialists declaring for Capitalism. A religious Barack Obama praying on his knees, changing his name to a Muslim, dissing Israel and declaring for the Judeo-Christian philosophy of Capitalism.
Oops! I think he did!
Janet, unlike Obama, is too ground in the Keynesian philosophy to change colors, therefore, each new Fed meeting will create its own anticipation but nothing like we saw today as the word “patient” was bid a fond adieu.