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18/09/15

21:40

Post #: 16020843
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Originally posted by siameseparrot ↑

Global Stocks Slide, Futures Tumble On Confusion Unleashed By "Uber-Dovish" Fed

Submitted by Tyler Durden on 09/18/2015 06:54 -0400

What was one "one and done", just became "none and done" as the Fed will no longer hike in 2015 and will certainly think twice before hiking ahead of the presidential election in 2016. By then the inventory liquidation-driven recession will be upon the US and the Fed will be looking at either NIRP or QE4. Worse, the Fed just admitted it is as, if not more concerned, with the market than with the economy. Worst, suddenly the market no longer wants a... dovish Fed?

While consensus was split if the Fed was going to hike or keep rates the same (although with Goldman pushing for the latter and even urging further easing, it is no surprise for the first time ever a FOMC member suggested negative rate), everyone was expecting some hawkish component to yesterday's FOMC announcement: either the hike itself, or a hawkish "hold" in which the Fed would promise a hike is imminent any moment. After all, 7 years later, the market needed at least a little confirmation that the economy is finally starting to pick up through the lens of the Fed. Nobody expected that dovish mess that was unleashed at 2pm yesterday, in which the Fed explicitly made it clear that it now has a third mandate: responding to Chinese and global events, and that a rate hike is virtually impossible any time emerging markets are "tantruming" due to the same dollar strength that accompanies any pre-hiking intentions, thus proving what we have said all along: the Fed is trapped in a catch 22...

As for the Fed admitting it is now trapped by the market, here is Vanguard's senior economist Roger Aliaga-Diaz: " We are concerned with the Fed's acknowledgement of recent market volatility in its decision. The Fed runs the risk of being held captive to the markets as, paradoxically, much of that volatility is due to the anticipation and uncertainty around when the Fed will move."

What's worse, said Catch 22 also confirms that just like all other central banks who hiked just to ease promptly thereafter, starting with Japan's failed attempt to escape ZIRP in 2000 and continuing through all the aborted rate hikes in the New Normal, a reflexive attempt to stimulate confidence, and thus inflation, by hiking rates first and hoping inflation follows, will not work forcing central banks to consider the "last option" (hyper)inflationary paradigm - direct monetary injections to the general population bypassing the bank transmission mechanism, where money creation is trapped in capital markets. In other words, monetary paradrops. That, of course, would be the final event before central banks lose all confidence, and incidentally is precisely why the market is trading as it is right now: down big in response to the most dovish Fed we have seen in over two years.

http://www.zerohedge.com/news/2015-...es-tumble-confusion-unleashed-uber-dovish-fed

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