Last week, China allowed the Renminbi to jump .5% in a day to the highest level since the end of 2015. The ECB probed the possibility of going negative to an extent only American politics could imagine. Demanding some stage time, the Fed penned some wishy-washy generalities sandwiched between head scratching comments from Kocherlakota and Bullard.
A bit of context: Back in the 70s PBS aired a cutting-edge comedy show from England called Monty Python's Flying Circus #GIK. When skits would devolve into chaos or get stuck in an improvisational dead end, an authoritative voice would simply interject, "And now to something completely different." The era of quantitative easing has reached that point.
Let's consider some "insight" from the Fed:
The U.S. Federal Reserve's latest economic projections contain an encoded message crucial to understanding the central bank's policies: Inflation has been stuck below the Fed's target in part because officials don’t actually want to get it back up.
It's important to recognize that the Summary of Economic Projections, released four times a year, does not consist of forecasts about the real world. Instead, each member of the policy-making Federal Open Market Committee is asked to pretend that he or she has complete control of monetary policy. Under this assumption, they submit their baseline assessments of how the economy will develop.
If, for example, you were a monetary policy hawk who thought the Fed was keeping interest rates too low, your economic forecast might include excessive inflation. In your projection, however, you get to choose your own policy. So your submission will feature the higher interest rates that you think are needed to keep inflation in check -- not the outcome that you actually expect.
Ya follow?? And given all that mental masturbation, put the FF rate at .875 !
Abrupt segue to Bullard, a CB-er giving flip-flopper a new meaning. cut to CNBC -
This is a breaking news story. Please check back for further updates.
Low rates may be causing low inflation, St. Louis Fed President James Bullard theorized in Friday remarks.
Bullard, who is a voting member of this year's Federal Open Market Committee, suggested in prepared remarks for a policy conference in Frankfurt, Germany that the current period of low interest rates and low inflation could potentially persist for a long period of time. Furthermore, raising rates could conceivably increase inflation, he said.
He didn't conclude this argument was correct, but suggested it deserved further analysis.
Here's what needs to happen - and if you have a pulse and a Twitter feed you know what I'm going to say - The Fed needs to can the Openness Experiment. It needs to stop steering a quantitative regime with a rates compass. It needs to concentrate on the calibration of policy as reflected back to them in market prices rather than attempting lock markets down in a faux-stability 4th mandate.
And now to something completely different....