Everyone following the Federal Reserve today was wondering if it would keep the phrase “considerable time” to characterise the period between the present and the date of the first interest rate hike.
At 2:00 p.m. ET, we learned the Fed ditched “considerable time” in favour of the word “patience” (How is that different, you ask? No one is quite sure yet, but most people think its a shorter period of time).
The phrase, however, remained for reference, and that may have tripped up some computer algorithms designed to flag it.
Here’s the new language from the Fed:
Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy. The Committee sees this guidance as consistent with its previous statement that it likely will be appropriate to maintain the 0 to 1/4 per cent target range for the federal funds rate for a considerable time following the end of its asset purchase program in October, especially if projected inflation continues to run below the Committee’s 2 per cent longer-run goal…
CNBC was fooled. Almost immediately after the statement was released, CNBC’s Carl Quintanilla tweeted a screenshot of the network (see above), which announced the Fed had kept the language.
Peter Tchir from Brean Capital sent out a note after the announcement suggesting this was an algorithm issue, since that’s where the instant market reaction often comes from. Here’s Tchir’s reaction after reading the whole statement:
I think this is more hawkish than the markets initial reaction. They are on the path to hiking rates (even if the dots moved down by an 1/8 which is somewhat irrelevant since the eurodollar futures are still pricing far less). I think this will NOT support Oil. Which means HY won’t be supported. Which means equities, will not be supported.
For now, the stock market rally, that Tchir is sceptical of, is holding up.