By Richard Breslow, a former FX trader and fund manager who writes for Bloomberg
Give her credit, Janet Yellen did indeed manage to leave Jackson Hole with September again “live”. Even without an explicit pre-commitment. It’s been a long slog, still has caveats and data-dependency, but it’s there nonetheless. It was well played, even if the hike-denier set still maintain that she wouldn’t dare. And accomplished with no pain to the markets.
It really was a group effort, taking a cascade of speeches to set up the denouement. Even then, it required a final push by the Vice Chairman to get traders to focus on what is a changing rate-rise balance of risks.
If it weren’t for the fact that a lower neutral rate has finally gained acceptance as likely economic reality, I’m not sure whatever they said would have been believed.
But one-and-watch is now a realistic strategy that will finally allow the Fed to be opportunistic rather than needing a grand plan. Clearly, the probabilities were mispriced, whatever ends up happening.
I’m not sure why so many people seem grumpy about what transpired. This should be good news for everyone.
I just can’t rate people who’re upset at the prospect of two-way markets. Maybe just buying whatever is the applicable dip has become too beloved a crutch. Another form of corporate welfare.
This development also spices up non-domestic economic releases for U.S. investors. But both Kuroda and Coeure reiterated that their central banks are ready and prepared to do more. Someone should benefit from excessive monetary policies. Why not, for once, U.S. savers.
More importantly, the Fed seeing the economy as finally having clawed its way within “hailing distance” of fulfilling the dual mandate should be celebrated. Even if you think its optimistic thinking. It’s popular to describe everything as horrid, but fact is you have to search back to September 2010 to find a negative jobs print. Inflation may be “too low” but it’s rising.
The NFP is crucial, but let’s not desperately try raising the bar on what’s a good number to preserve an investing status quo that everyone claims to decry.