Dentalfloss
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COMMENT: While the longer-term forecasts for the economy and rate remained the same, the near term trajectory for Fed rates and the economy has been clearly shifted higher, and any chance that this could be classified as a 'dovish hike' should have been clearly "chased out of the room", except for those are in the camp for 'wishful seeing' and/or 'wilful blindness'. It is ironically teh more hawkish from the aspect that it clearly designates current policy rates as 'accommodative', but needing to be 'neutral'. Thus the dot plot now sees four rate hikes in total for 2018, with the end year rate seen at 2.375% vs. 2.125% in March, ans 3.125% end 2019 vs, March 2.875% - i.e. four rate hikes this year end and next. Near-term forecasts for the economy have been revised up, very modestly for GDP, with a tweak lower for Unemployment in 2019 and 2020, and a tweak higher for 2018 core PCE to 2.0% from 1.9%. The statement was stripped back to remove any element of doubt about the near term outlook, perhaps most notably 'growth of household spending has picked up' (somewhat out of tune with the latest Beige Book, but in line with solid forecasts for tomorrow's Retail Sales. No references were made to trade tensions.... yet again.
The simple point for some time has been this: the opportunity cost for holding 'cash' or cash like instruments falls with every Fed rate hike, and by contrast the opportunity cost of chasing riskier assets (duration, credit and equities) rises concomittantly - everything else is primarily a noisy FOMO/TINA narrative that gets one 'hospital pass' after another. Incoming data may be emboldening the Fed, but east financial condtions relative to the end of 2015 even more so (see chart from this morning's preview). The ECB will struggle to even vaguely match the Fed's rhetoric when it meets tomorrow, and as for the BoJ on Friday, well Mr Kuroda must be rubbing his hand with glee, though the US president may yet undermine his hopes. Thought on the Powell 'presser' in tomorrow's Good Morning.
from Marc Ostwald
The simple point for some time has been this: the opportunity cost for holding 'cash' or cash like instruments falls with every Fed rate hike, and by contrast the opportunity cost of chasing riskier assets (duration, credit and equities) rises concomittantly - everything else is primarily a noisy FOMO/TINA narrative that gets one 'hospital pass' after another. Incoming data may be emboldening the Fed, but east financial condtions relative to the end of 2015 even more so (see chart from this morning's preview). The ECB will struggle to even vaguely match the Fed's rhetoric when it meets tomorrow, and as for the BoJ on Friday, well Mr Kuroda must be rubbing his hand with glee, though the US president may yet undermine his hopes. Thought on the Powell 'presser' in tomorrow's Good Morning.
from Marc Ostwald
