In effect, the markets are front-running every Fed move and baking future easing and accommodation into the cake. If the Fed tries to raise against those expectations they risk unwinding the entire post-Lehman “recovery” of inflated stock prices and ever-expanding Fed funny money.
by James Corbett
The International Forecaster
Yellen and the Federal Open Market Committee surprised exactly no one earlier this week by announcing that they were standing pat at the target federal funds rate of 1/4 to 1/2% that they set back in December. As Yellen explained in justifying the decision:
[…] “the Committee’s baseline expectations for economic activity, the labor market, and inflation have not changed much since December: With appropriate monetary policy, we continue to expect moderate economic growth, further labor market improvement, and a return of inflation to our 2 percent objective in two to three years.”
Blah blah blah. You know the usual story by now:
The labor market is strengthening! (Just don’t mention that it’s mostly part-time and contract workers being hired, many of whom are getting a second (or third) job to make ends meet during the “recovery.”)
Economic growth is picking up! (Just don’t point out that profits and earnings estimates for most industries have been drastically slashed since the beginning of the year.)