Weekend Reading: Did The Fed Just Cage The Bear?

by Lance Roberts
Real Investment Advice

The past two week’s have been full of Central Bank interventions starting with the ECB last week and culminating with a more accommodative Fed and BOJ interventions this week.

As stated earlier this week:

“The Fed currently finds itself in a tough spot from a “data dependent” standpoint. Last December, when the Fed Funds rate was increased, the Fed discussed the potential for further rate hikes in 2016 as inflation and employment data strengthened. With that data improving, along with the strong rebound in the financial markets, the Fed runs the risk of losing credibility if they DO NOT hike rates again on Wednesday OR give a very strong indication they will do so at the next meeting.”

I was wrong. The Fed jumped into the boat with the ECB this week by not only ignoring the recent spate of stronger employment and inflationary pressures, but by lowering economic forecasts and reducing the number of rate hikes this year from 4 to 2. This was, in effect, “Yellen’s Bazooka.” Given the more “accommodative posture,” it is not surprising the financial markets decide to jump into the boat with her.

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