Give her credit, Janet Yellen did indeed manage to leave Jackson Hole with September again ‘live’. Even without an explicit pre-commitment. It’s been a long slog, still has caveats and data-dependency, but it’s there nonetheless. It was well played, even if the hike-denier set still maintain that she wouldn’t dare. And accomplished with no pain to the markets.
It really was a group effort, taking a cascade of speeches to set up the denouement. Even then, it required a final push by the Vice Chairman to get traders to focus on what is a changing rate-rise balance of risks.
If it weren’t for the fact that a lower neutral rate has finally gained acceptance as likely economic reality, I’m not sure whatever they said would have been believed.
But one-and-watch is now a realistic strategy that will finally allow the Fed to be opportunistic rather than needing a grand plan. Clearly, the probabilities were mispriced, whatever ends up happening.
This post was published at Zero Hedge on Aug 29, 2016.
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