John Williams, president and chief executive officer of the Federal Reserve Bank of San Francisco stated this morning on CNBC that they could care less for your foolish notions that the Central Bank is only interested in propping up stock prices.
Oh to be sure, for a while, that was the plan.
No longer. In the midst of a plethora of emerging market pain, lower stock prices, and high-yield convulsions, the discussion centered around normalization of the Balance Sheet in six years, and the possibility of four rate hikes in 2016.
Yes, that’s right … four.
This does not mean that we are going to see four rate hikes in 2016. No doubt, it is simply communative Fed guidance. But I think the guidance is pretty clear. The Fed is beginning to signal that the ‘wealth perception effect’ (a term I believe the Fed coined?) of higher stock prices is no longer a principle guiding factor in their decision making process.
While the rest of the world is trying ease as quickly as possible, the Fed is talking about measures to tighten.
The ship is sailing ladies and gentlemen. And the Fed has left the building …