Michael Covel
By Michael Covel
Posted
May 23, 2016
How the Fed Is Fooling You Again
Last week, Janet Yellen’s flunkies rattled Wall Street by talking up an interest rate hike in June…
Richmond Fed President Jeffrey Lacker told the Washington Post that the chance of a June rate hike was “pretty strong.”
And New York Fed President William Dudley said a June rate hike is a “reasonable expectation” based on the economy’s strength.
So, is Mao Yellen really going to turn off the easy money spigot that’s been keeping stocks at all-time highs and Wall Street bankers flush with cash?
Well, there’s one easy way to tell.
And it has nothing to do with what Yellen’s PR agents at the Fed are pumping…
The Only Data That Matters
Janet Yellen loves to portray herself as a modern day Detective Joe Friday from the classic TV show “Dragnet”…
Just the facts, ma’am!
She dresses up as a no-nonsense public servant driven only by objective data. And under her leadership, she’s constantly spinning that the Fed has never been more “data dependent.”
Yellen’s fair-minded Fed is supposedly not influenced by the short-term gyrations of the S&P 500 Index.
It only relies on “clean” domestic data on labor markets, inflation and economic growth to determine U.S. monetary policy.
And when that data says it’s time to adjust rates, that’s what the Fed does.
Except when it doesn’t.
You see, it’s true that Yellen’s Fed is data dependent.
But it’s mostly dependent on one piece of data. And that’s the performance of the stock market.
Here’s a prime example…
http://dailyreckoning.com/fed-fooling-again%E2%80%8B/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+dailyreckoning+%28The+Daily+Reckoning%29
And the Fed blinked. It put rate increases on hold despite enormous economic data indicating it was time for a rate hike.
And like clockwork, the S&P immediately rallied.
That, ladies and gentlemen, is not following the data. That’s engineering the data.
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