Various representatives of the Federal reserve act almost every week, but the main purpose of these presentations is not to convey to the market the point of view of the regulator.
First, in the camp of the fed is the so-called “doves” and “hawks”, and their vision of monetary policy did not initially coincide. Thus, each time, depending on who the speaker comes to the market completely different portion of information. Someone talks about the need to raise rates, someone that it must at least keep at the current levels, and it is better to reduce. In fact, these people simply adjust to the market sentiment by what you need the regulator at this particular moment.
For example, if the dollar weakens too much and it needs to be strengthened, “talking heads” of the fed starting to talk about an upcoming rate hike and how it feels good for the us economy.
To some extent this scheme really works, only large market participants all these statements do not perceive, and have your own opinion on the events.
As an example, you can take yesterday’s performance of President FRB of Boston Eric Rosengren. Almost every word gives outright propaganda.
So, first he said that the probability of a rate hike by the fed is much higher than the market believes.
Well, it looks like the Federal reserve know something that you don’t know big investors.
As the graph shows, the market is waiting for this year a maximum of one rate increase, and then only by 0.25%. But the fed’s forecasts reflect a more rigid perspective. However, the fed has repeatedly rejected his words, including at the last moment.
Well, betting is one thing, but economic forecasts – a few more. But here the fed keeps the brand. If you believe the statements of Mr. Rosengren, and other colleagues, the US economy is doing quite well, anyway to worry there.
But the market expectations again does not agree with what the fed is trying to impose.
“The market is too pessimistic about the American economy,” said Rosengren on Thursday.
By the way, it is worth to say a few words about the stock market that the regulator is trying to drive up. The fact that shares rise contrary to common sense, as sales companies and forecasts are reduced, and thus, the share price must also fall. However, the fed put himself in a difficult situation, because for the first time in its history, has upped the ante at precisely the moment when sales and company profits began to decline.
The most objective assessment of the current situation, as usual, gives the bond market. Treasuries almost always moving in unison with the changes in the macroeconomic data.
