Trump To Fed: “Bow Down To Caesar” Or Risk “Horrifying Misstep”
"The institutional threats they face make the thought of any misstep horrifying. With all of the sniping from other parts of Washington and the looming new appointments, they understand the need to be the perfect Caesar’s wife. A lot to ask as they disengage the policy auto-pilot of the last eight years."
Ok, so we all know the Fed is more "S&P dependent" than they are "data dependent," right? Don't forget this from Wells Fargo:
The Fed rarely tightens unless the market is pricing at least a 60% of a rate hike one month before the FOMC meeting. Figure 7 underscores this point. The Fed has implemented 25 bps hikes on 27 occasions since 1991. Twenty days before the hike, the implied probability was below the key 60% level in only three of the 27 cases. The Fed tightening in December 2016 fit the historical pattern. The rate hike was very well advertised by the Fed, and the implied probability was about 80% a month before the FOMC meeting.
As I wrote last week, it's not often that we get to say "wow, that Wells Fargo note is looking pretty prescient right about now," but given that the excerpted passage and chart shown above came out in early February, this is one of those rare times.
But when it comes to the Fed anno 2017, one of the interesting dynamics to observe is the interplay between a committee that wants to normalize and a new administration that wants a weak dollar.
Obviously, a FF hike only serves to exacerbate the extent to which rate differentials are dollar supp
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