Citi Admits The Truth: “If The Market Drops 10%, The Fed Will Most Likely Not Hike”

Back in April, when Bill Dudley first admitted that the Fed’s rate hike will be “shaped party by the market reaction”, we first coined the term Dow Data Dependent. Some mocked this assessment, but 5 months later it has proven to be spot on, following Bill Dudley’s repeat appearance in which he cautioned that a September liftoff looks “less compelling”, catalyzing the biggest two-day surge in the Dow Jones in history. Today, Citi admits that the “Dow” is precisely the only “data” point that the Fed cares about.
From Citi’s rates strategist, Jabaz Mathai:
All the components for the US growth index have been reasonably strong over the last few months, and this was reinforced by the higher than expected revised second quarter GDP estimate released yesterday (3.7% vs. a Bloomberg median survey estimate of 3.3%). On the other hand, the global growth index is treading water. The Fed has to decide whether to hike based on domestic economic strength and the unsuitability of zero rates and super accommodative policy in the context of current growth or to hold back to better understand the disinflationary impact of slower external growth.

This post was published at Zero Hedge on 08/31/2015.