To be sure, the market’s reaction to Janet Yellen’s Friday speech in Chicago was… how should I put this so as not to offend anyone … completely retarded.
Bloomberg calls that “markets seeking equilibrium.”
Whatever. I call it “fade the f*cking news.”
But the market reaction notwithstanding, Goldman has now ratcheted their March hike probability to 95%.
For those still interested, here’s the bank’s takeaway.
In remarks this afternoon, Fed Chair Yellen indicated a readiness to raise the funds rate at the FOMC’s March 14-15 meeting in fairly explicit language. She said that as long as “employment and inflation are continuing to evolve in line with” officials’ expectations, “a further adjustment of the federal funds rate would likely be appropriate”. As a result, we now see a hike at the March meeting as close to a done deal, and have raised our subjective probability to 95%.
The remainder of Chair Yellen’s speech focused on the Fed’s post-crisis monetary policy strategy in general, and did not discuss incoming data in much detail. However, given constructive comments about current economic conditions from many Fed officials this week—including from Vice Chair Fischer at today’s US Monetary Policy Forum—we think committee members will see recent news as consistent with their outlook, and therefore supportive of further tightening. At this stage, the February employment report—to be released next Friday—may have more bearing on the committee’s guidance about action after the March meeting than on its decision whether to hike this month.