Continuous ‘grooming’ of markets – to tolerate (as mildly as possible) what’s increasingly an obvious series of rather overt ‘hints’ by more Federal Reserve officials, is either being responded to with more market ‘complacency’, or one can prefer to view Thursday’s rather uninspiring action is reflecting a renewed concern that the Fed will move. 

Dismiss it or embrace it; the Fed’s desire is clear; and the message generally is a contradiction in terms: the idea that things are so bleak the Fed won’t be raising rates beyond the initial move, or that it will be a series of hikes. Well it won’t be much because the Fed ‘dare not’ really move rates up; looking at our Debt levels and what gets added tells you that. 

There is another point: perhaps the Fed actually (and behind the scenes) now believes that rates going higher, will ‘increase’ deflationary pressures (they call that ‘lower inflation’ typically), rather than reflect an economy with real traction. That might be an irony if it’s the case, as we know they can’t stomach anything that really increases our debt service levels given that growth is so mediocre. 

How would they ‘package’ that tactic, if indeed it’s the case? Hike rates at the same time as Government tries to take the ‘edge’ of too-steamy markets with a series of tax or policy moves that are constantly debated, but not implemented. Sure, we believe the Fed does not ‘really desire’ suppressing recovery or even wage levels; though they are left with few options because of the monetarism failure by keeping ’emergency’ measures ‘on’ for too extended a time. 

We don’t have any conviction about Fed motives here; actually suspect they don’t either! We did, and still do, believe that Stanley Fischer was elevated to the Vice Chair position basically to steer the exit from an impossible Fed trap, from the corner that they’ve painted themselves into. 

The conclusion may be that they ‘missed an opportunity’ repeatedly; to raise rates without a particularly deleterious effect on the economy. We’ve believed they should get off the near-zero rate for some time; and now either way they are dealing with a sub-optimal growth prospect for a majority of citizens. 

Consumption rates are down, while new debt levels are up. We’ve assessed it as a trend of borrowing to survive by many citizens (they’re citizens not simply consumers), not to thrive. And those that thrive by virtue of high asset prices, are starting to become nervous about perpetuating very old trends. It’s not just in ‘Retail’, where it’s handy to blame the online buying trends, or offload issues to ‘nervousness’ because of rising terror concerns. Though all that’s a part.