For those traders and investors that witnessed the Greenspan era of FOMC chairmanship, the current FOMC Chair Yellen certainly takes on similar characteristics with respect to establishing a somewhat opaque access to information. This type of limited information certainly creates greater conversation and opinions regarding economic outlook and the future rate environment. We must remember that economics is a social science. Although market participants incorporate as much data as possible for more accurate trading and portfolio management decisions, it is somewhat difficult to establish a fool-proof method of predicting FOMC decisions.
Chair Yellen brought up interesting concerns including the recent international market volatility. She added that the current crude oil environment creates negative inflationary pressures. From the press conference, we may also extract that the Fed is monitoring the strength of the US dollar and its impact on commodities. Language alluding to the inflation target was once again used to communicate that inflation of 2% has certainly not been reached.
Today’s FOMC statement and announcement certainly generated a significant amount of opinions on the direction of the Fed. Before the announcement, market participants read numerous and varied communications and research notes regarding the rate decision. Frankly, a number of research and brokerage firms were wrong. Those who believed rates would increase versus those who wagered that rates would not change were equally balanced.
Many analysts believe that the markets will continue to see somewhat inconclusive data with respect to future FOMC statements and rate decisions until the Fed sees a sustained global and domestic economic recovery.
