ROHR COMMENTARY Excerpt for MyTradingBuddy
Thursday, August 20, 2015 (early)
The ‘Receding Door’ Effect.
There seems to be a tendency in the current central bank rate hike psychology which resembles certain cinema special effects. In some psychological or futuristic thrillers the hero is sometimes seen chasing down a hallway toward a door. Yet the hallway elongates and the door recedes no matter how hard and fast he may run. This is what the real world situation of some of the key developed economy central banks feels like at present as well.
The desire of the Bank of England and even more so the US Federal Reserve to raise interest rates is palpable. Yet the latest BoE ‘Super Thursday’ combined rate decision along with immediate minutes release, Inflation Report and press conference defused near term hike expectations. Governor Carney was very clear that his previous speech had been misinterpreted. The top of 2016 would in fact only be a horizon where it would be discussed, not implemented. (See My Trading Buddy blog August 6th post.)
And on Wednesday we saw the (prematurely released) most recent FOMC meeting minutes. They highlighted how little appetite there was for a hike at the last meeting. It is also easy to infer that global commodity and economic weakness since the meeting would leave the FOMC less likely to raise rates in September than at the meeting. If all of the massive Quantitative Easing (QE) has not reinvigorated the global economy, might that mainstream failure represent the new ‘tail risk’?
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