by Chris Black
The Fed is playing a completely different game than it appears.
The regime in DC is using interest rate policy in place of diplomacy, which is why the Fed is acting in a way that is increasingly at odds with the current state of the economy.
That is to say, the Fed has stopped actually responding to the economy with interest rate policy and is instead using it as a geopolitical battering ram.
That means by raising rates, or at least talking about it, you’re increasing the value of the dollar causing harm to other currencies.
My guess is the main target is China’s precarious housing market, which we appear to have broken already as the PBOC is now easing dramatically.
The problem with that is it requires that the Fed actually DO it, because if it backtracks, the jawboning won’t work next time.