The Federal Open Market Committee (FOMC) of the Federal Reserve met today and held its target federal feds rate unchanged after their initial hike in December. Fed Chairman Janet Yellen’s press conference after the meeting can be be summed in one word: Uncertainty. I feel she is a very articulate individual but the gist of what she said was unhelpful to market participants.
From her answers to reporter’s questions, it was clear the FOMC has no plan going forward to rev things up, sounding more like a subjective process reacting to immediate events such as Brexit, Orlando and weak jobs. FOMC’s critics, including myself, feel the time has passed to raise rates while the listless economy and overvalued stock market is dangerously drifting toward the rocks with no means to steer it away.
The Fed should have raised rates a year ago even if symbolic when the economy could have handled it and given them a cushion to make adjustments to set-backs. Now the stock market has been distorted, commodity-based emerging markets wallowing and developed trade partners weakened.
Yellen couldn’t explain why the Fed’s forecasts and expected policies have constantly changed over the last three years and what their plan was to fix the lack luster GDP growth after nine years of recovery. Mostly likely the economy has lost confidence in the Fed after their policies or lack of have caused lending to shut down, business not wanting to invest. job seekers not motivated and leaving fixed income retirees in the lurch.
While Yellen said otherwise, I’m afraid the presidential elections are going to come into play and will blunt any further credibility the Fed may have left.
