The Federal Reserve issued its Federal Open Market Committee statement on Wednesday. I've said before the Fed’s “dot game” in which Fed officials put dots on a grid of interest rates and dates is a pointless exercise. Naturally, that is all traders cared about. The dots moved just enough to imply there could be only one — if any at all — Fed move this year. This set bond traders’ hair on fire, and the short end of the yield curve took off.
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There is no point in me railing about the absurdity of this reaction; it’s just what traders do.
I had expected Janet Yellen’s press conference to set off some fireworks, but it was a complete dud. The questions were lame, and she gave no unexpected responses. It's not the reporters fault; Yellen drained all the energy out of the reporters by speaking so long before taking questions. She spent an inordinate amount of time convincing everyone that Fed officials have absolutely zero foresight or ability to anticipate future economic or inflationary trends.
Good to know ... and a real confidence booster.
Janet, we get it. The Fed is “data dependent.” You will do nothing until some evidence jumps up and slaps you in the face.
Dwight Johnston is the chief economist of the California and Nevada Credit Union Leagues and president of Dwight Johnston Economics. He is the author of a popular commentary site and is a frequent speaker at credit union board planning sessions and industry conferences.