“The Gig Is Up”

In a switch from what are typically only one-sidedly dovish comments, NY Fed President Dudley was balanced this week, even citing reasons for why the Fed would want to hike rates.
Dudley stated that ‘being at the zero-lower-bound is not a very comfortable place to be’, because it ‘limits’ flexibility and has ‘consequences for the economy’. He said it ‘hurts savers’, and while acknowledging ‘what is happening’ to financial markets, he avoided directly citing risks to financial stability. Anxiety-riddled conversations about financial instability are probably implicitly restricted to a ‘behind-closed-doors-only’ rule.
FOMC members are slowly and carefully trying to change the conversation. Yellen completely diluted away any meaning behind ‘considerable period’ to make it all but meaningless. Bullard said to that he still ‘sees the first tightening at the end of the first quarter’.
A March 18th hike seems reasonable to me, since US economic improvement appears to remain on track (at least for the moment) and since the FOMC seems more anxious to begin the normalization process. Actually though, by waiting even until March, it is possible that the FOMC risks missing its window of opportunity in terms of using US economic momentum as its cover (what irony).

This post was published at Zero Hedge on 09/25/2014.