Here’s Why I Think the FED Was Pretty Hawkish Yesterday
Skerdian Meta • 2 min read
Yesterday, FED members were all over the place with Yellen taking the first seat at the congress. We briefly posted an update with some of the most important comments where I highlighted their hawkish-ness.
Why do I think the comments were mostly hawkish?
First, we all agree that we're in a time where we're only looking for hawkish comments. No one can deny the improvements in the global inflation and economy. So, the FED is running out of reasons not to be hawkish, aside from the expected fiscal stimulus.
However, yesterday Yellen said that the FED must not keep their hopes on Trump's fiscal stimulus. Well, that's what she's going to say, isn't it? Otherwise, it would make the FED look like a kindergarten baby. We understand from these few words that they've got an eye on the fiscal stimulus.
That's definitely hawkish because it means that they are free to take the foot off the gas pedal in this monetary accommodation car which has been going on for nearly a decade. In fact, FED member Kaplan (or was it Lockhart) said these exact words last evening, so that's another hawkish comment.
Everyone has accepted the better inflation and economic environment in the last year or so, but the wages have been the last piece of the puzzle which are starting to fall in place. Yesterday, Yellen acknowledged the pickup in wages as well, although she added that the pickup is not that dramatic.
Of course it's not dramatic; wages have never gone up dramatically, but at least they're going up and the FED finally accepted it.
These are very major turning points because it means that another rate hike is coming soon, unless another world war kicks off, God forbid.
And, Yellen did say it yesterday. She said that she can't tell if an interest rate hike is coming up in March or June. She has never talked about rate hikes, apart from the meeting when the FED actually did raise them, which was in December 2015 and 2016.
That comment alone is hawkish enough to start a USD rally. Actually, the rally started yesterday but it has stalled, probably waiting for Yellen's second day at the congress and the US inflation report which is coming up.
For these reasons I think the FED was pretty hawkish yesterday. We know the forex market is not as straightforward now because of politics and the central banks are only half of themselves nowadays.