Everything was all fine and good this morning and then… a Fed official opened their mouth.
The Boston Fed’s Eric Rosengren (a voting member) hit the tape around 8:15 ET with the following rather hawkish-sounding commentary:
“A failure to continue on the path of gradual removal of accommodation could shorten, rather than lengthen, the duration of this recovery. Some observers argue that the fragile global economic situation could justify an even more patient U.S. monetary policy, simply on risk management grounds. In this debate I would offer the observation that, while it is important to acknowledge the presence of global risks, market indicators have so far provided little evidence of outsized risks”.
And this is what happened to stocks immediately thereafter:
Oops. So now we’re down nearly 200 on the Dow and as you can pretty clearly see from the following, yields responded to Rosengren’s perceived hawkishness as well.
Then, as if that wasn’t enough, the Fed’s Daniel Tarullo showed up on CNBC and said the following:
TARULLO: WOULDN’T FORECLOSE POSSIBILITY OF RATE RISE THIS YEAR
TARULLO: INFLATION RATE HAS NOT BEEN AT OR NEAR 2% FOR YEARS
TARULLO: WANT TO SEE ACTUAL EVIDENCE THAT INFLATION WILL RISE
TARULLO: LABOR MARKET HAS BASICALLY BEEN FLAT FOR A WHILE
TARULLO: ISM SURVEYS SUGGEST SOME GROUNDS FOR QUESTIONING
TARULLO: NO ONE SHOULD FOCUS ON PARTICULAR PIECES OF DATA
Well, it’s good that no one “should focus on particular pieces of data,” because the Fed surely hasn’t at least when it comes to jobs. But he did manage to sneak that ISM safety valve in there, which is now serving as a kind of “get out of jail free” card for the September meeting (more here).
Oh, and then we also got Kaplan with this:
KAPLAN: RATE HIKE CASE HAS STRENGTHENED IN LAST FEW MONTHS
And in case that wasn’t enough Fedspeak for you, Kaplan will be talking again tonight at the Dallas Security Traders Association convention around 8 ET.
The moral of the story is that this band of merry PhDs needs to go back to being little known technocrats instead of playing celebrity economists because this is becoming a traveling roadshow.