In the through the looking glass world of monetary madness, everything-and nothing- is as it seems. At today's Fed press conference the Chairman did his best to obfuscate some answers to virtually all the wrong questions. Hidden among the "data dependents" and forecasts, I found 2 (to me) important nuggets. One makes you bigger, one makes you small.
First: The Fed bar chart of their hypothetical Fed Funds moves tilted sooner. I had felt there was a risk of 2016-ers joining the 2015-ers and extending the consensus pretending. After all, this would carry little harmful consequence but help offset possible negative action of "no more QE" which for some reason continues to circulate wildly. As readers know, we believe QE2 was stock level induced (confirmed by Ben today) and QE-lite and Twist were active policy because many other nations were on hold and the ECB was on drugs (tightening). The new imaginary tightening horizon came witha BIG tell, however. The message today was clearly, extreme accommodation does not only take place at ZIRP. This truism was set forth to confirm the reactionary bias to policy. The Fed is saying they will follow the market out (no real choice there) and let you know if your too far ahead.
Second: The Fed appeared to support a view that the curve could re-steepen. Thus rendering Operation Twist to a temporary hallucination and silly sterile game with PDs that it really is/was. The curving of the curve also could have a positive consequence in markets by interpretation. The reality is, who knows? We are in uncharted water and the world's a dicey place. A shorter Bernank presser would have fielded 1 question like this: Go ask Alice.