Wednesday, December 18, 2013
Both Santa AND Grinch
BUT they also gave Mr. Market a candy cane by effectively changing their employment goal. It was 6.5%, but in this statement, mutatis mutandis:
The Committee also reaffirmed its expectation that the current exceptionally low target range for the federal funds rate of 0 to 1/4 percent will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The Committee now anticipates, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal.Mama Yellen is going to be even kinder than Uncle Ben. The reason for this change is that the unemployment rate will fall to the 6.5% mark about the 2nd quarter next year, what with the fact of all the old farts staggering out of the work force.
This is a de facto huge expectation loosening, and it will be interesting to see how inflation develops next year. Because in fact inflation in GDP terms came in right about 2%! So there isn't much margin there, and somewhere around the June meeting, Mama Yellen might have to come up with a little more mutatis mutandis syrup to heap on the stock market waffles.
We know she will, though, because she loves all her children so well, especially Citi Lou and Goldie Saxaphone, the littlest Hoos. And you can be sure that she will just gather all her children into her warm loving arms next spring and wipe the tears of anxiety from their plaintive eyes and whisper words of comfort into their ears JUST FOR THEM. There is no need to fear while Mama is there. No need at all.
2015 will therefore be pretty interesting. This isn't going to stabilize easily now. The most likely market move after today is for an epic run on commodities, purely because everything else has run out. It may be very durable, and there is a possibility of a recession in 2015 because of it. There's a lot of money out there and a lot of it is going to want to run into the US.
I am now going to start the rotation out of stocks. Mama Yellen looks to me to be utterly unequipped to handle a boisterous teenage speculative recovery.
No. It is the young whippersnappers not being added to the workforce. Ths has to be the biggest oe ever about boomers retiring.
The total publicly-held Federal debt, net of debt held by the Fed, fell in 1Q and 2Q 2013. As far as I can tell, when the numbers are tallied it will show a similar decline in 3Q and 4Q. It looks to me like they're just backing off of QE by enough to hold the publicly-held debt roughly constant.