I spent the morning reading 6 reports on pending Fed activities coming down the chimney for Christmas. Two took a few sentences to address the follow-on adjustments to IOER and RRP. Almost all included soothing comments about "dovish hike" or reduced path. Many took on a nostalgic tone of returning to "normal."
The truth is the ab-normalcy is just about to start. The never before successfully attempted trick is to raise the operating floor of the system without actually altering the flow of activity through the plumbing. The important part of the stunt, lifting the Death Star capacity to at least $1T, most likely won't make the evening news. The use of the weapon will be the highlight (or possibly lowlight) of the 1st quarter of 2016. The Open Market Desk has expectation jitters only JJ Abrams can appreciate right now.
This is the time of year when everyone makes next year predictions that fortunately are rarely graded. I'll toss my kindling on the fire here: A central bank can guide itself by rates targeting or quantity targeting but not both. If credits continue to snug after the move, the Fed will struggle to pinpoint the cause - the level of rates or the level of "stuff"in the system. If things get frothy, the promises of an attenuated cycle will have to be thrown overboard. The Fed gets blamed in either scenario.
I keep thinking about an old X Files episode where all the phone-in TV psychics are getting murdered. The killer turns out to be a guy who actually can see the future that tells his victims, "You shoulda seen this coming." I've got the uneasy feeling all of those market guys I've read today, and myself, are going to here that statement in our heads next year.