The Economy: The Fed finished its January meeting Wednesday with a dramatic flip from hawkish to dovish. No change in interest rates and significant revision to their future course of action. The number of rate hikes in 2019 has been reduced from 4 to1; maybe 1 … if financial markets and The Donald agree that it's ok. Shrinking the balance sheet has been dramatically modified with previous lower targets abandoned. Fed Chair Powell has stressed that his Fed is data dependent. The Fed has interpreted the economic data as indicating a weakening global and US economy. There has never been a pause in a Fed tightening cycle. Only a reversal from tightening to easing. Some see Powell's move as indicating that the next Fed move will be to cut interest rates. Some see a set-up for more QE. Most see the Powell Fed as capitulating to market volatility and White House pressure. Now the refrain is, "Meet the New Boss; same as the Old Boss." In short, the Fed is continuing their role as being reactive and beholden to financial markets. The global addiction to central bank stimulus and financial repression continues. |