It may be the fastest transition from a “hawkish” to “dovish” stance by a Fed talking head in history, after New York Fed President Bill Dudley went from “it is important not to overreact to every short-term wiggle in financial markets” and predicting “gradual rate hikes for the rest of the year” yesterday after the close, to “the Fed is in no rush to hike” in an interview with Bloomberg this morning.
Meanwhile, it’s getting harder for the mainstream media and their asset-gathering sponsors to hide the reality of the post-Trump rally economic ‘improvement’ from investors’ eyes.
During the Bloomberg interview, Dudley also admitted there’s “no rush to hike” as the “economy is clearly not overheating,” warning of the potential for Q1 weakness as “sentiment [improvements] are not showing up in the hard data yet.” Perhaps he finally saw the following chart?
Indeed Mr. Dudley: and the ‘hard’ data has NEVER caught up to spiking sentiment…
Given his hawkishness yesterday and dovishness today, markets are reacting to the what now appears to be yet another policy re-convergence with the suddenly dovish ECB.
As RBC explained yesterday, the Trump Reflation trade only works when the Fed and ECB diverge on policy, with the former seen as hawkish, and the latter, dovish.
As of this moment, the Fed once again appears to have no idea what it wants to be, having realized that the entire economic rebound it hiked rates on was purely psychological.