The Fed just cut interest rates because of a scenario that was not to have taken place by any of their “forward guidance” calculations. It was only mere months ago that this same Fed was telling the world that raising rates and shrinking their balance sheet was going to be not only like “watching paint dry.” But the outgoing Chair, Janet Yellen professed we wouldn’t see another financial crisis “in our lifetimes.”
Since then we have had crisis after crisis that has now morphed into the Fed having to go back on everything it said and start cutting as the “market” is at never before seen in human history highs.
Now some would think that such a move would all but ensure a “pop” in the “markets,” at the least initially. But so far that is not the case and some have asked me for my thoughts, so here is my main one. To wit:
The Fed has ended the normalization process two months ahead of the already reduced schedule.
Remember “autopilot” surety? Remember the “watching paint dry” descriptor? All – null and void. The Fed now looks like a bumbling mess. Period.
This, in my humble opinion, is the sign of abject panic behind the scenes of the Fed, because all they thought has been proved wrong – and this shows it writ large.
The issue so too shows the “market” and may panic along with them.
As always. we shall see.
© 2019 Mark St.Cyr