We have not been populist haters when it comes to Fed criticism. In fact, we were an early advocate of the IOER regime and several facility (ya, they're QE too) developments. As we noted 2 weeks ago, the growing chartalist movement has moved the Fed toward outcome targeting. Jon Hilsenrath, Greenspan's bath tub confidante, is floating the latest Fed balloon over the market this morning.
Hilsenrath (WSJ) reports that further LSAP is "data dependent" - Fedspreak for "we don't know." However, he also indicates that the OMC will move toward "showing" a goal of 2% long run inflation and "achievable" unemployment under that long run goal, target, objective, concept or threshold for inflation. Something between 5.5 and 6.5% based on past generalities seems reasonable. This is novel thinking like Lady Gaga is to Madonna. I guess critics could call it "reductive."
We call this type of policy public wishing. The idea could be useful IF it were coupled with surprise moves aimed at achieving it. The "open" objective has reduced efficacy in monetary policy and attenuated outcomes. The key benefit to US accommodation we see is the plethora of other global CBs now tilted toward ease. if we are correct Fed targets will be "vacinity-ed" simply by staying the course. Now the $64k question: Will term structures obediently adhere to the gravitational pull of the zirp or begin to risk weight the possibility of getting it right. If the answer is the latter, a seismic shift in allocation and position lies ahead.