The Fed showed again today why leaving OZ is so hard. It's easy to switch to a Qe regime when your economy/financial system is leading the world over the abyss. It is very hard, however, to snug up a bit when rest of said world is so sketchy. Domestically, this also highlights why the list of Central Banks successfully traversing the landscape out of a QE regime and back to a rates regime is so short.
To be fair, the Fed has done a decent job of slowly walking the markets back from massive LSAP's. The Taper Tantrum proved the system was healthy enough to handle a pretty serious shock. (A shock bigger than most still realize in our opinion.) Throwing the lever back to a rates regime with an initial move is proving much harder to do. Beyond a diversity of Board and Pres. views on the action lies the reality of a cornucopia of variables and moving parts. The "go slow" policy results.
We still feel, ultimately, a central bank is a domestic institution. We continue to believe a move in Sept is not only probable but needed. We have to make an attempt to leave the free money OZ if only to expose the weaknesses. Someday, sometime, the cycle will naturally turn and the ability to adjust rates down will be called on. Few (none) have been brave enough or savvy enough to pull off the switch. It's easy to get to QE. It's difficult to leave. Keep in mind, Dorothy left Oz to get back to the Dust Bowl.