David Rosenberg is confused by Federal Reserve chair Janet Yellen.
In a note to clients on Monday, Rosenberg wrote that Yellen’s commentary at last week’s post-Fed-meeting press conference — when compared and contrasted with the Fed’s policy statement — makes “no sense.”
Seriously, is the same paragraph in her post-meeting/pre-press conference statement, Janet Yellen said “the outlook abroad appears to have become more uncertain of late” and “the situation abroad bears close watching” and then ended with “I do not want to overplay the implications of these recent developments” and that “we have not fundamentally altered our outlook.”
That makes no sense.
Basically, Rosenberg doesn’t understand why Yellen is talking about the global situation — which to him means “China” — if the Fed is not changing its outlook. In addition to declining to raise interest rates on Thursday the Fed also cut its expectations for future GDP growth, inflation, and interest rates over the long-term.
And so take these two elements together, and it looks like the Fed does have a new outlook.
This all, however, comes on a background of a strong US consumer, something Yellen did acknowledge, stating, “the economy has been performing well and we expect it to continue to do so.”
And Rosenberg notes that US consumers, on their own, comprise an economic engine larger than China’s economy.
So what gives?
If the Fed thinks the US domestic economy is in good shape, then this abundance of caution from the Fed is either unwarranted, an admission that all the Fed cares about is China and global financial markets, or potentially relates to the Fed not wanting to tighten monetary policy with a potential government shutdown looming.
Rosenberg wrote that, “it’s much more expedient to point the finger at China as the prime reason for staying on the sidelines than to blame Congress.”
And so maybe that’s a thing.
But the overall thrust of Rosenberg’s commentary is something that has, at least in our view, become apparent in the four days since the Fed meeting: there is no thread anymore.
Some strategists wrote that even though the Fed kept rates at 0%, we’re entering a new era for investor in the post-crisis environment of zero interest rates. Others have said the Fed is helping markets too much.
What does seem apparent, though, is that whatever you want to see whatever you want to see in the Fed’s decision, you’re more or less able to see. Everybody wins and everybody loses.
What we know for sure is that the Fed declined to raise interest rates, and that they meet again on October 28-29.
NOW WATCH: KRUGMAN: Wall Street Is Wrong, Janet Yellen Is Making Exactly The Right Move On Inflation
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