On Wednesday, the Federal Reserve announced the latest decision by the Federal Open Market Committee with respect to monetary policy. That decision contained two primary components:
No rate hike currently, although, as expected, announcements of further rate hikes in the future, and; The beginning of the process to cease reinvestment of the Fed’s balance sheet. The announcement was notable for two reasons:
The Fed did NOT hike rates because the underlying economic data, and, in particular, the inflation data, suggests the economy is too weak to absorb a further increase currently, and; The unwinding of the balance sheet is generally believed to be bullish for stocks. It is specifically the second point I want to address today, although, as shown below, commodities, PCE inflation, and interest rates currently suggests there is downside risk to current economic projections.
This post was published at Zero Hedge on Sep 24, 2017.