After the Fed's statement, one thing was clear: the career economists at the Marriner Eccles building are very confused, admitting to hiking rates for the first time in nine years "even as economic growth slowed late last year". But more confused are the Wall Street economists who follow the Fed and are expected to interpret what the Fed says, means and hints, especially when said Fed has no clue what is going on, like right now - the same people who a month ago said, for example, predicted that a rate hike was bullish; the same people who blamed the economic slowdown in the winter of 2014/2015 due to China on... snow in the winter.
So while their opinions are utterly worthless, for the record, here is what the economisseds see in today's 558 words of sheer Fed confusion:
"When it comes to the statement, what's most obvious is the absence of content, not the presence. Nowhere did Yellen & Co. reference 'market volatility,' a euphemism for the global equity declines experienced in 2016....There's only one thing to learn from this barrel-of-oil-sized hole in the rather terse [Federal Open Market Committee] statement: March depends on job markets (still running strong) and inflation theory (no data, but the Fed believes)."
- Guy LeBas, Janney Montgomery Scott
"The first line of the statement leads with 'labor market conditions improved further even as economic growth slowed late last year,' a clear reminder of what drives the Fed at this stage in the cycle. Yes, they have to watch market and global developments, but when wages are beginning to accelerate and the Fed expects 'some additional decline in underutilization of labor resources,' following 'strong job gains,' it is clear that the bar for market turmoil to deflect them from 'gradual' tightening has been raised."
- Ian Shepherdson, Pantheon Macroeconomics
"Policy makers are indicating that it is too soon to gauge the impact from the sharp fall in global equity and oil prices and because of that they are not prepared to offer an assessment on the risks to the economic outlook, labor markets and inflation. Clearly by not offering a risk assessment on the outlook the FOMC is indicating that at this time there is a low probability of them raising official rates at the March meeting. " -
- Joseph Carson, AllianceBernstein
"The FOMC statement was reworded to signal increased concern about 'global economic and financial developments,' but, overall, the tweaks to the statement were limited enough to be consistent with no major change yet to the policy outlook. In the end, decisions will depend on the data and market developments."
- Jim O'Sullivan, High Frequency Economics
" The statement highlighted the potential downside risks from what is transpiring in global financial markets and in many economies around the world....This replaced previously used phrasing stating a belief that the risks to the outlook for economic activity and the labor market were balanced even taking into account domestic and international developments. All in all, the relevant changes to the policy statement tilt in the dovish direction, consistent with our forecast of just two additional tightening moves this year."
- Joshua Shapiro, MFR Inc.
"It seems clear to me that the Fed is shading the economic risk to the downside. I’m reading this a touch more dovishly than the market appears to be. “Big takeaway” is FOMC’s description of slower economic growth in late 2015, near-term inflation remaining low. Statement was “negative” on economic growth, yet “not so much as to signal greater accommodation ahead”
- B. Hunter Hill , SunTrust Robinson Humphrey
"We find ourselves in the odd position that the Fed is almost certain to hike if markets stabilize in the next month and half, but might not hike if markets continue to slide"
- Chris Low, FTN
Two important changes in statement were acknowledgment that FOMC is “closely monitoring” global economic, financial developments and disappearance of sentence that said FOMC “reasonably confident” inflation will rise to objective.Omission of “reasonably confident” sentence doesn’t mean FOMC thinks it won’t hit inflation target but it not longer wants to “pound the table." FOMC has backed off a little on how confident it is with regard to inflation and the ability of economy to weather global headwinds
- Ethan Harris, Bank of America
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However, without doubt the best comment of the day was this one:
The Fed has signaled they have started the year even more clueless as to what is happening than last year...YOU SHOULD BE SCARED...
— FxMacro (@fxmacro) January 27, 2016
Source: Dow Jones, Bloomberg