The Fed passed again. Sean Corrigan

This article is from Sean’s Midweek Macro Musings dated 18th March.

Not that anyone really should have been surprised, but the Fed passed again at this week’s FOMC and, indeed, effectively eased by making plain that it now saw only two more hikes this year (each ‘data-dependent’, naturally), rather than the previous four.

Yields fell between 12-15bps across the curve, the USD came under heavy assault, gold rose by as much as $40/oz, crude by no less than 10%, as a result of what the Fed’s own pronouncements declared was a move aimed at stabilizing the value of the Board’s 401k’s in the near term, rather than at giving any Olympian consideration to ensuring that monetary fluctuations or banking injudiciousness would avoidably impair the ability of those in the real economy to frame and execute their long-term plans—i.e., to discharging the Fed’s principal function, not nursemaiding ETF flippers.

Seemingly justifying this was a tepid, downwardly-revised retails sales number, coupled with an actual contraction in industrial output. If one looks more closely, however, it quickly becomes apparent that weakness in both is concentrated in the energy sector and so is not an unalloyed cause of woe for everyone else. All the while, good old inflation—in Fed-style, CPI terms—is creeping upwards. Median CPI is very likely to break out this month, leaving Fed funds at perhaps one-tenth of where they should be!

Amid much high-flying rhetoric and an accompanying media blitz, the break-up of the Two Sessions has still failed to introduce any real clarity to what is intended for China beyond yet another round of stop-gap public spending and a further raft of ill-advised proposals to slice, dice, and repackage more of the nation’s burdensome debt into extra layers of accounting opacity and disintermediated fuzz.