The Fed is Pulling Out Slowly and That Should Turn You On, Or Not
OK, first of all I need to apologize. I insisted the Fed wouldn't pull out from ZIRP until not a day before my 60th birthday in the year 2040 and obviously that didn't happen. Yay FOMC, you found some balls!
That said, I don't think anyone should be surprised by today's announcement. This pulling out isn't a big grand pulling out, it's more like a slow, slow, slow, super slow pulling out. And that is definitely the way to go given that these fools have no idea WTF is going to happen once they pull out for real.
You've all read the announcement by now but let's revisit anyway:
Information received since the Federal Open Market Committee met in January suggests that economic activity has been expanding at a moderate pace despite the global economic and financial developments of recent months. Household spending has been increasing at a moderate rate, and the housing sector has improved further; however, business fixed investment and net exports have been soft. A range of recent indicators, including strong job gains, points to additional strengthening of the labor market. Inflation picked up in recent months; however, it continued to run below the Committee's 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. However, global economic and financial developments continue to pose risks. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee continues to monitor inflation developments closely.
Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.
OK seriously not even being a smug asshole here, I'm good with this. Take it slow, baby. Many of us expected absolutely nothing before 2075 so really, any move is better than the Fed sitting there like a limp noodle while the economy blows a load on its ass.
The 2 percent inflation target is what matters here. The Fed has clearly tried every trick in its book over the last several years to fire that baby up, and inflation remains a frigid lover. Poor Fed. Here it is flouncing around, making romantic dinners and scheduling date nights but that damn inflation just doesn't give a shit.
From Business Insider:
On why the Fed lowered its rate-hike expectations, Yellen said the committee felt that achieving its desired economic outcomes would require a lower path of interest rates than what it saw in December.
She said the Fed could overshoot or undershoot on its 2% inflation target, and its tolerance for doing so in either direction is equal. She noted the divergence between survey-based measures of inflation (which have been low) and market-based expectations (which have been on the high side.)
Overshoot? Girl, please. Y'all haven't overshot anything since 2006 when Bernanke said housing prices couldn't possibly fall. Don't get ahead of yourselves now.
Personally, I'm down with the Fed taking it slow. Slow like a slow jam from the 90s. That slow. With some Cool Water and those fancy light switches that adjust yaknowwhatimsayin.