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Never Go Full-Trichet
Via Kevin Muir of “The Macro Tourist” fame
Remember when Bank of Canada Governor Poloz surprised the market with a second rate in early September? It caught the market off-guard as the market had priced in much less than a 50% chance of a hike.
Here is the chart of the BAX futures and CAD on the day Poloz shocked the market with the second unexpected hike.
Contrary to the Federal Reserve, which, in modern times, have never tightened when there was less than a 50% chance, the Canadia
“Something you don’t do.” No, certainly not in today’s environment of central banking that beggars thy neighbor. It has come a long way, and sadly not in a good way. In contrast, consider this policy speech by former Fed Chair William McChesney Martin from over a half-century ago:
“”In the field of monetary and credit policy, precautionary action to prevent inflationary excesses is bound to have some onerous effects—if it did not it would be ineffective and futile. Those who have the task of making such policy don’t expect you to applaud. The Federal Reserve, as one writer put it, after the recent increase in the discount rate, is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.”
Wow! America’s golden age.