I'm not sure fwp, we know that the Fed is not supposed to be...

I'm not sure fwp, we know that the Fed is not supposed to be political yet they've consistently found a way to keep rates where they are throughout this election year. I think that's quite an aggressive stance when you consider it's just a quarter percent and also the impact on savers. In the last couple of weeks, the US data has been better and expectations of a rate rise in December have picked up, then all of a sudden they're talking about lower for longer and letting inflation run.

I'm probably not as distrusting of the Fed as most. From what I've read and seen of their speeches, it seems that there is more of an ideological battle taking place amongst the voting Governors. One side is saying we need to raise rates to keep ahead of inflation and also to reload the gun for future downturns, the other side is saying that raising rates now is very dangerous, all risks are to the downside, and the stimulus needs to be extended at least until GDP growth and inflation are much higher than current levels. They mention that projections for these stats have been revised downwards through much of this year, and also that an outbreak of inflation would be easily managed.


For me, I interpret their actions in terms of US economic self interest. In one of the speeches they mentioned that the increase in the USD in recent years had the equivalent dampening impact on the US economy of a 2% rise in interest rates. I think that's huge, especially in a world of low growth. Every time they raise rates and push up the USD, they end up helping someone else's economy at the expense of their own. I just can't imagine the American strategists/policy makers being that charitable.

It's easy for people/commentators to say just put up rates; the Fed needs to maintain credibility. I think there's a worse scenario for Yellen and the Fed. - they put up rates and cause a slowdown and then have to backtrack on their policy. I think that will do more harm to their credibility.

So, as long as growth and inflation are undershooting and other powerful economies aren't catching up then Yellen won't be putting her name to any significant change of policy. This should support both equity markets and gold IMO.

(Sorry for the delay - feeding time at the zoo)