from Wolf Street:
Markets threw a hissy-fit in the wake of the Fed’s widely ridiculed “None and Done” decision to hold rates at near zero where they’ve been through thick and thin since December 2008. So it was time for St. Louis Fed President James Bullard to distance himself from this debacle.
And he did on Saturday, at the annual meeting of the Community Bankers Association of Illinois, by shooting an expertly targeted broadside at the Federal Open Market Committee, of which he is a non-voting member this year. But the broadside was directed at a lot more than just the failure of the FOMC to raise rates at the last meeting. And shrapnel perforated his own foot.
The meeting was “pressure packed,” he said, and the decision was “a close call,” with “a large majority of the FOMC” expecting to kick off “policy normalization” – raising rates – “this year.”
“I would have dissented,” he said. But he couldn’t dissent because he’s a non-voting member.
Supported by a 33-slide presentation, he pointed at “the market reaction” – the fact that stock markets around the world swooned after the decision. Everything the Fed does and says is with one eye on the stock markets and with the other eye on the bond markets. Instead of pumping up the markets, as the Fed had perhaps hoped to do, the decision seems to have “created rather than reduced global macroeconomic uncertainty.”
“I argued against the decision,” he said.
He lamented the misconception out there that a measly 25-basis-point rate increase is being interpreted as being “restrictive monetary policy,” when in fact it’s still an “exceptionally accommodative monetary policy,” and just the first baby step toward “normalization.”
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