Central Bank Soap Opera Hides Financial Globalization
Stock markets suspect Federal Reserve has interest rate jitters … Hints that the Fed won’t raise interest rates in March are proving to be good news for miners and oil producers’ share prices The Federal Reserve’s William Dudley said further strengthening in the dollar could have ‘significant consequences’ for the health of the US economy. – UK Guardian
Blame it on the dollar!
The Federal Reserve hiked a tiny bit and markets around the world plunged. This is the big story that implies the further loss of Fed credibility.
But there is an even bigger one that we’ll discuss at the end of this article.
Let’s continue with this Guardian analysis. The reporting is along the lines we would expect: We learn that market players have come to the logical conclusion that the Fed is not going to raise interest rates again any time soon.
Or even if they do “raise” them, they’ll have a negligible impact on real rates.
On Thursday, large stocks moved up and reports circulated that Fed officials were continuing to have “second thoughts” about a series of rate hikes. Here, more from the Guardian:
William Dudley, a top Fed official, said on Wednesday that monetary conditions had tightened since December’s quarter-point rise and rate setters would have to take note. Further strengthening in the dollar, added Dudley, could have “significant consequences” for the health of the US economy. Translation: the Fed probably won’t raise in March.
The dollar then sold off yesterday, while commodity prices rose, especially the share prices of miners and oil and gas producers. It was quite a clever statement, helping move the dollar down and the market up.
Even more importantly, it began the process of Fed damage control. The Fed hike had not merely bashed stocks, it had buttressed the dollar.
…click on the above link to read the rest of the article…
