Weirdly enough, this author gets lumped into the nutty conspiracy theory group when talking about the Fed. First and foremost, I have no official history or records of the FOMC sacrificing a goat or a chicken before their meetings. Also, there is no evidence that I’m aware of that the shareholders control the Federal Reserve, even though they get paid dividends annually for voting to keep this party going for over one hundred years. Lastly, there still is no evidence that they give a crap about anyone earning less than $10 million per year. On those three facts alone, we can say there is consistency at the Fed.
Unfortunately today’s FOMC statement and press conference spoke volumes more than the 130 words published below.
If it was no big deal, which in reality none of the theatrics were a big deal, then why did the Dow crater 1150 plus points and the rest of the market look like we’re preparing for a 1973 party all over again?
The rumor was pushed earlier by Citadel and others that there was a chance of a rate increase today. There is a wee bit of market manipulation Alex Jones tinfoil in my soul that the idea was that if there was no increase the markets might initiate a relief rally on the idea of “at least there wasn’t a rate increase” today and voila there was:
Unfortunately for Chair Warsh, the press conference was a horrible idea. His opening statement didn’t really add much and by the time it was over just after 3 pm ET, the markets determined that his inflation hawkishness, at least for now, was a bluff. It’s not a matter of forward guidance, it’s a matter of perception and confidence in the Fed’s actions. The market rolled over at just the hint that he does not understand the problems of cumulative sticky inflation nor the track record of the Federal Reserve since March 2009.
This brief disturbing insinuation that he’s uncertain was enough to create a sell off in the long end of the curve, a proverbial warning shot to the FOMC. The good news for the Chair is that volume was nothing spectacular, earnings will undo a lot of the equity market technical damage, and his policy formulation still has time to be postulated where the markets and other central banks will be able to determine if he’s serious about inflation or another Powell pillow fighter.
Stay tuned for Jackson Hole.
