Best Reaction Yet: “Yellen Speech A Whole Lot Of Nothing”

Friday, August 26, 2016
By Paul Martin

by Tyler Durden
ZeroHedge.com
Aug 26, 2016

While previously we showed Goldman’s kneejerk response to the Yellen speech, according to which the central bank-spawning hedge fund saw Yellen’s speech so hawkish it raised Goldman’s odds for a September rate hike from 30% to 40%, it was also wrong at least based on the market, which in turn cut its September rate hike oddsfrom 32% to 26% after the speech.

A far better reaction comes from Macquarie’s Thierry Wizman, who brings us back to the conventional wisdom that prevailed on Wall Street for the past week, namely that Yellen’s speech is “a whole lot of nothing,” and likely didn’t change any minds on expectations for a rate increase this year, Wizman told Bloomberg in phone interview.

Wizman adds that the speech implies a rate increase is still coming this year, and Dec. is the most likely timing of that. “There were some people in the market who expected that she would invoke Sept. and that was probably the wrong thing to expect”; Fed has moved away from calendar guidance.

Macquarie now sees a 60% chance of a rate hike in Dec., and Wizman expects two rate increases in 2017, as Yellen “seems to be downplaying risks of low growth.”

He adds that the risks to a December rate hike including “more turbulence from Europe, as Italians hold referendum in Oct. and concerns over Brexit could percolate again; U.S. election and how it could inform decision making.”

Last but not least, Macquarie points out the obvious, namely that if Republican presidential candidate Trump were to rise in polls, “could be detrimental to growth sentiment because of disorganization in Republican platform and lack of clarity on Trump’s policy positions.”

Translation: the odds of a September rate hike are now in the hands of Trump.

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