The initial reactions wre modest but directionally ‘correct’ given the dovish bias to the Fed Minutes – stocks are up, bonds are up (lower in yield), and the dollar is down. But then traders read the warnings that due to excessively easy financial conditions, “a tighter monetary policy than otherwise was warranted“, something Goldman has been warning about for months, and stocks sank.
To be sure, there were 3 very dovish quotes:
1. “Many participants, however, saw some likelihood that inflation might remain below 2 percent for longer than they currently expected, and several indicated that the risks to the inflation outlook could be tilted to the downside.” 2. “Participants agreed that a fall in longer-term inflation expectations would be undesirable, but they differed in their assessments of whether inflation expectations were well anchored.”
3. “Most Fed officials saw wage-price framework still valid”
Bonds and the dollar were following that bias…
This post was published at Zero Hedge on Aug 16, 2017.
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