There's head scratching over whether today is hawkish or dovish, given SPX is falling. Equities may be trading on Powell's more cautious growth message, so that drop doesn't mean today is hawkish, just that equities don't like the message. 2-year Treasury yield down, i.e. dovish. pic.twitter.com/lGQiB9QoIs
— Robin Brooks (@RobinBrooksIIF) December 19, 2018
Head scratching? Really? No!
Shut Up! Shut Up!
We thought carefully about how to normalize policy and came to the view that we would effectively have the balance sheet run off on automatic pilot and use monetary policy, rate policy to adjust to incoming data. I think that has been a good decision. I think that the runoff of the balance sheet has been smooth and has served its purpose and I don’t see us changing that. And I do think that we will continue to use monetary policy, which is to say rate policy as the active tool of monetary policy.
Automatic pilot, what a hoot.
Allegedly, the market reacted to Fed Chair Jerome Powell’s comments in the Q&A following the FOMC announcement.
The reason I say “allegedly” is that I am not at all convinced the market would have reacted differently no matter what the Fed said.
Dot Thought Thickens
The dot plot always thickens.
The December meeting will show unanimous or near-unanimous opinion that the Fed is doing a brilliant job for the current year.
Conversations on Hikes
The Fed is so far behind the curve they are too late.
But the choices are pop the bubble sooner or later.
There is no longer a "don't pop the bubble option"
That said, the sooner the bubble breaks the better. t.co/lN4OaTTa7Q
— Mike Mish Shedlock (@MishGEA) December 19, 2018
In the real world, bubbles eventually matter.
The problem is timing. It is very difficult to predict when things finally matter.
But when bubbles do matter, what the Fed then does or says is “Too Late To Matter.”
Mike “Mish” Shedlock