The Fed and the equity markets are largely self-referential at this point.
That means that rather than effectively reflecting and addressing the broader reality of the economy, they are focused on themselves.
For the Fed, their strong desire is to raise rates two times fairly soon to get off the Zero bound before we draw closer to the Presidential elections. The Fed is very sensitive to this.
Only the terrible economic results in the first quarter held them off from raising 25 basis points at this meeting. They need to raise within the context of some semblance of economic stability to maintain the illusion of confidence.
As for the US equity market, it is running on hot money, stock buybacks, and 'the Game.' The Game is the Ponzi-like self-referential speculation, with a charade of economic numbers coming out of a spin machine that keeps pushing prices higher into asset bubble territory.
The Fed would like to cover their ass before the market crashes, and before moneyed interests trot out their latest assortment of political candidates.
Like the IMF, their policies have been serial failures, going back to the 1990's at least. They do not wish to be held accountable for this, as noted in the intraday commentary from the other day.
When privileged people repeatedly fail at a task, they quite often turn to harshness and even cruelty towards those whom they were purported to be helping, in a revulsion against their failed obligations.That is the long and short of it.
Since they are incapable of faults, while maintaining their credibility which is founded upon their reputations and personal prestige, the people enduring their many plans themselves must have failed. And so the people, not the planners, must be made to change, to improve, and often to be chastised for their shortcomings.
And the financial masters will do this, almost piously, in the name of saving a system which in fact has become an extension of themselves, and which finally serves no one well but them.
So no real reform can come, and little progress can be made, because the 'managers' are incapable of even admitting to their repeated failures out of self-preservation. And they will excuse this in the name of preserving 'confidence.'
This is the credibility trap.
Have a pleasant evening.