FOMC: Losing Patience, the Sweet Mystery of Central Planning

"The Federal Reserve’s vice chairman, Stanley Fischer, said that it was time for the central bank to bring a little more mystery to its relationship with financial markets, suggesting on Friday that the postcrisis era of detailed guidance was drawing to a close."

NY Times, Stanley Fischer Suggests Fed Will Give Less Guidance, 27 February 2015

“It seems to me that you unnecessarily constrain yourself. There’s no good reason that I can see for us to telegraph every action that we have to take.”

Stanley Fischer, Vice Chairman FOMC

A back story to this is that the new Fed Vice Chairman Stanley Fischer does not believe that the Fed needs to be so overt in 'tipping their hand' to the market.

He feels it is more useful to the Fed to keep the market 'guessing' what they will do next and when. And he has apparently persuaded the Committee on this.

This is coming out even more clearly in Chairman Yellen's press conference.

 

Expect more uncertainty, and less 'forward guidance.'

Press Release

Release Date: March 18, 2015

For immediate release

Information received since the Federal Open Market Committee met in January suggests that economic growth has moderated somewhat. Labor market conditions have improved further, with strong job gains and a lower unemployment rate. A range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately; declines in energy prices have boosted household purchasing power. Business fixed investment is advancing, while the recovery in the housing sector remains slow and export growth has weakened. Inflation has declined further below the Committee's longer-run objective, largely reflecting declines in energy prices. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of energy price declines and other factors dissipate. The Committee continues to monitor inflation developments closely.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. Consistent with its previous statement, the Committee judges that an increase in the target range for the federal funds rate remains unlikely at the April FOMC meeting. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. This change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams.

NAV Premiums of Certain Precious Metal Trusts and Funds

Sprott Silver has raised its cash level by selling 100,000 ounces of silver from the Trust.

They have essentially converted a small portion of their silver assets to cash in order to manage their ongoing expenses.

This is less interesting method than a secondary offering, but the appropriate response given the somewhat dampened enthusiasm in sentiment that is a portion of the bear market in metals.

 

The Fed's Next Doofenshmirtz Moment - 'Quicksilver Markets'

THE MISSION

“The FOMC is firmly committed to fulfilling its statutory mandate from the Congress of promoting maximum employment, stable prices, and moderate long-term interest rates. The Committee seeks to explain its monetary policy decisions to the public as clearly as possible.

Such clarity facilitates well-informed decision making by households and businesses, reduces economic and financial uncertainty, increases the effectiveness of monetary policy, and enhances transparency and accountability, which are essential in a democratic society."

THE REALITY

 

I do not think that this blog entry really isn't being a naysayer, just negatively commenting on those facing a difficult task. 

Or even really unfair.

After all, the Fed has been blowing up the US economy, and taking the world to the brink of economic and political disaster, about every eight years since 2000.  And less regularly going back 1987 at least.

 

And they have been getting plenty of help from the government and the media.

They all put the banking system and the financial elite first, and the devil take the hindmost. 

 

When the powerful are single-mindedly determined to have their way, even if it is horribly wrong, it is difficult and often dangerous to be right, or to even admit to knowing the difference. 

Their policy errors will be a new chapter in the backward predicting textbooks of the dismal science.  And I would probably enjoy this if I were reading about it in the more distant future.

 

What were they thinking? 

And they appear to be about right on schedule for their next Doofenshmirtz Moment.

 

US Treasury Warns Stock Market Is Approaching 'Two Sigma Threshold' and Quicksilver Markets

 

They are not evil.  Or even dangerously incompetent and frightened.  They are equal measures servile, bureaucratic, arrogant, and banal.

 

And they and their courtiers are caught in a credibility trap.

 

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

 

Gold Daily and Silver Weekly Charts - Death of Exceptionalism - Rosebud

The economic news came in weak this morning.

 

If there was some link between the Federal Reserve and the real economy they would probably not do anything for the rest of the year.

 

But, policy being bank-centric, they will likely do a little jaw-boning tomorrow, and make a symbolic effort at raising rates sometime this year.

 

Stocks moved sideways and the dollar took off some of its recent gains.

Gold and silver were bought as physical overnight, and sold as paper during the day in New York and London.

FOMC tomorrow.

 

'Patient' is the new 'rosebud,' and exceptionalism is the mark of Kane. 

Have a pleasant evening.

 

 

 

SP 500 and NDX Futures Daily Charts - A Swing and a Miss

The economic news continued to come in weak this morning.

West Texas Intermediate settled at a six year low today.

Stocks were slumping most of the day, with techs managing a little green ahead of Oracle and Adobe after the bell.

Speaking of Oracle, they were in line for earnings per share and missed revenues. They did increase their dividend. And the stock was up slightly after hours.

As for Adobe, they beat both earnings and revenue numbers, and were trading lower after hours because of higher expectations.

The hope for Adobe and Oracle is 'the cloud' and subscription based models. And other echo bubble like metrics.

Is the US economy exceptional? Are Americans better than everyone else?

No.

 

All eyes on the Fed verbage tomorrow. 

Have a pleasant evening.

 

 

 

Gold Daily and Silver Weekly Charts - Through the Darkness Love Is Among Us

"We are slow to master the great truth that even now Christ is, as it were, walking among us, and by His hand, or eye, or voice, bidding us to follow Him."

J. H. Newman

 

This morning the US economic news came in rather badly.

 

Empire manufacturing missed rather badly coming in at 6.9 versus 8.8 expected.

 

Industrial Production and Capacity Utilization missed consensus at .1% and 78.9% respectively.  Even more surprising, however, was the revision of last month's Production to -.3% versus the positive .2% that was previously reported.

 

And the NAHB housing index missed as well.

 

Stocks rallied and the dollar took a break from its parabolic rally as the markets looked at the real economic data and casts doubts on the Fed's raising rates anytime soon.

 

As you may recall, the Fed is having a two day meeting this week.  It is widely expected that they will remove the word 'patient' from their verbage, but will do nothing else.  Removing 'patient' is supposed to clear the way for a small interest rate increase in the next meeting in June.

 

The Fed would like to raise rates at least 100 bp to 1% largely to get off this extraordinary zero bound in rates, which is serving little except to help to stimulate an asset bubble in bonds and stocks.  It is certainly not helping the real economy.

 

And having created another asset bubble, the Fed would like to have some room to cut rates when the next financial crisis comes, which is due in the next 24 months or so.  This largely depends on the trigger, that being some exogenous event that will provide the spark that will light the bonfire of the vanities which the Fed has constructed.

 

Gold and silver moved lower and then sideways today after a brief overnight rally.  This is the 'normal pattern' these days as Asia buys physical and the West, largely led by London and New York, sell paper.

 

We are an unfortunate people in our leaders, who have become obsessively preoccupied with lining their own pockets, and interfering with the lives and governments of others.   They create weakness and disorder, in order to provide more opportunities for plunder, while calling them 'investments.'

 

And yet, like in most troubled times, with wars and rumours of wars, love moves among us.  The worldly will soon be fearful and scattered, not knowing which way to turn. And things will look dark indeed.

 

But through the darkness comes the call, and the comforting presence, in which His own may have reassurance and confidence, despite the breaking storm.   His hand has never been closer, or more certain, and in this we may be quiet and glad.

 

Have a pleasant evening. 

 

 

 

 

 

 

 

 

 

The hem of His robe is where our healing lies

The wounds in His hands are where our life resides

Love is moving, moving among us

The beat of His heart our steady rhythm

A soul of a King and a Kingdom

Love is moving, moving among us

Love moves

Love is moving, moving among us

He illuminates with a holy fire

And it burns with the flame of God's desire

Love is moving, moving among us

The power of God is in His presence

And the mercy of Heaven in His movement

Love is moving, moving among us

Right now, yeah

Love is moving, moving among us

So we reach, we reach our hands to Him

To touch, to touch the Healer's hand

We fall, we fall in worship

Our God is with us

Love is moving, moving among us

Audrey Assad, Love Is Moving Among Us