In view of Greg Gibbs, analyst at Amplifying Global FX Capital, the Fed projections themselves are a problem as the fan chart of possible rate moves over the coming years has widened.

Key Quotes

“These projections were introduced by the previous Chair Yellen to give the market a sense of certainty that policy would stay accommodative for a long time.  They were intended to send a message to encourage animal spirits in the economy.”

“The Powell Fed seems to miss the point that it needs to urgently down-play the projections.  Powell has tried to do that with words, but the best way, perhaps the only sure way, was to demonstrate that they do not have to follow them.  And that meant not hiking in December was the by far the best policy option.”

“The Fed is still operating under the framework set by Yellen.  She was a thought leader and could set a policy framework to suit the conditions she faced. Conditions have changed, But the Fed is not yet displaying it can change.”

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