Here's The Huge Question For Today's Historic Fed Decision
Here's something I wrote for today's Bloomberg Markets newsletter regarding today's likely Fed Rate hike. You should sign up for our newsletter here: https://bit.ly/1IJLySS
Nobody's really debating whether the Fed will hike today. What people are debating is whether the hike will be a "dovish hike." What does that mean? Well right now the market is pricing in somewhere in the vicinity of two rate hikes in 2016. The Fed's own outlook (as seen in the dots) is for four hikes next year. A dovish hike would be some scenario where the Fed moves closer to what the market is expecting.
So how will we know if the hike is in fact dovish? Where there are a few different things to watch. One is obviously the dots. Do they come down for 2016? And do they come down in future years as well? The dots express the view of all the FOMC members. There's also the official statement where we'll get some idea of the various factors and considerations that went into the Fed's decision and what it's watching next year. And then there will be Janet Yellen's press conference where she'll give her take on things (arguably the only take that really matters).
The view on whether the hike is dovish will come from all of these different things. And there will be multiple interpretations. But one safe bet is that a lot of the analysis will ultimately be ex-post facto rationalization based on how the market moves. If equities and commodities rally and interest rates stay muted, then people will proclaim that it was a dovish hike. If markets sell off and rates jump, then it won't have been seen as a dovish hike. And if something else happens, and the narrative is muddied, then the opinions will get more varied, and so forth. So it should be an interesting day! Get excited.
Relationship Executive at Commonwealth Bank
8 年Nobody knows what they're doing. Particularly those that think they do !
Director, Head of Discretionary Portfolio Management Italy at Deutsche Bank
8 年Brilliant as always. I would add two interconnected points. 1. Kocherlakota changed his mind already after few months (last September he saw a cut in rates to negative territory, not a hike, at this meeting). He will also no more be a voting FOMC member next year while the hyper-hawk Esther George, now non voting, will. 2. The dovishness per se is a contingency which could well no more be needed next year. It is of course very important that the Fed acts according to what inflation and lablour market will warrant in 2016. The way these two points will interact will determine much of the "appropriateness" of the FOMC path going forward, and hence risk asset performance.
Channel Synergy
8 年It is meaningless and certainly not "historic."
Security Operations Specialist
8 年Jim Devine, you're so off-base, Capitalism as you know it has only been around since ~14th Century. Secondly, you so miss the days of unfettered capitalism in America? You were doing business prior to 1934? I am impressed. Oh, and before the creation of the SEC, there were laws governing the market at the state-level.
Lifecycle Marketing ? Performance Marketing ? Revenue Operations (RevOps) ? Growth Strategy ? B2C ? B2B
8 年My guess: They'll raise rates some tiny % for PR value, but will likely need to reverse course quickly in 2016 in a recessionary economic environment.