Well, I guess if you were looking for something dovish to latch on to in the face of a generally hawkish mood, you can always count on ol’ Crazy Eyez Kashkari.
Of course Neel isn’t a voter this year but he was Mr. Dissent in 2017 and he was out on Wednesday, ahead of the January minutes, to “clarify” what the addition of the word “further” to the statement means.
And yes, this is where we’re at (and to a certain extent where we’ve been at for a long, long time): debating the addition and/or subtraction of single words from policy statements in a fruitless effort to read the proverbial tea leaves on the way to basically choosing our own market adventure by trading on our subjective take.
The absurdity in the whole thing comes courtesy of the reflexive nature of the policymaker/market communication loop which makes it basically impossible not only to determine if the tail is wagging the dog, but also who’s the dog and who’s the tail in the first place.
In any event, Kashkari told Bloomberg on Wednesday that Wall Street is “overreacting” to nascent signs of inflation.
“Wall Street overreacts to everything,” he told BBG TV’s Michael McKee, adding that they “overreact on the upside, they overreact on the downside [and the Fed] can’t make policy based on market blips up and down.”
Zeroing in on the data in question, he said this:
I don’t want to overreact to one job report, which showed the wage increases of about 2.9 percent, or the latest CPI numbers. Again, we don’t want to dismiss the data, but I also don’t want to overreact to one month’s blip in the data.
I mean, I get the point, but then again, if the Fed isn’t going to depend on the data and they aren’t going to depend on the market, well then what exactly are they relying on to steer this ship?
And really, I don’t even know why I bother with this shit. These messages are mixed on purpose and no one is better at sending mixed messages than Neel who, in December, said he “think[s] we need to work very hard to protect against an ’08-type scenario, but if markets correct, it’s not the Fed’s job to protect investors from losses” only to, in the very next breath, basically suggest that the Fed wouldn’t raise rates even if the market went to infinity: “If we raise interest rates, not because of the job market, not because of inflation, but because we simply raise interest rates to try to constrain the stock market, that could be very costly.”
Oh, and this is the same Neel who in fact bailed out markets personally in 2008.
Anyway, circling back to the addition of the word “further” in the January statement, Kashkari had this to offer:
We debate each word change in the statement — a lot of debate goes into those — and I think ‘further’ is intended to say continuing the current path that we’re on, and I think that’s the debate that we’ve been having,
Got that? They had a debate about adding a word and the addition of that word refers to a debate about whether the current normalization path is appropriate in light of the data and all of that is “the debate they’ve been having”, or at least Neel “thinks” that’s what they’re debating.
Here’s what Neel’s old employer is “thinking” about the whole thing headed into the minutes:
At its January meeting the FOMC added the word ‘further’ to describe expected rate increases. We will look for a discussion of the failure to upgrade the balance of risks, the degree to which participants upgraded their inflation outlook, and potential indications for the rationale to add the word ‘further’ to describe the expected rate increases.
For those interested, here are some more gems from Kashkari’s Wednesday BBG interview:
- My reaction has been, let’s just take our time, allow inflation to come to us.
- We do pay attention to either currencies or the stock market but we’re not sitting here trying to engineer a certain level of the stock market.
- I’m not seeing signs personally of an imminent crisis building.
Admittedly, it sounds better live:
— Bloomberg (@business) February 21, 2018