Today at 2 pm The Federal Reserve will most likely announce a 0.25 bps move higher in Fed Funds rate taking it toward 0.75 bps.
I say most likely since it would only be the second rise in eight years, so I feel I want to couch that comment.
Nevertheless, the more important aspect comes a half-hour later, when Fed chief Janet Yellen holds her press conference.
Yellen’s comments on the incoming Trump administration will be what drive the bond and equity markets.
The Fed chair needs to tell markets the board’s policy will take its keys off of the incoming Trump policy, not that it will assess that policy and then move in a counter-direction in order to keep the status quo.
I believe the Fed chief and the board of governors need to take a back seat on monetary policy and get off of the TV. With the exception of the last two Fed chiefs — Ben Bernanke and Yellen — most Americans never knew who led the Federal Reserve.
Monetary leadership should come from the White House, not the Marriner S. Eccles Federal Reserve Board Building just off of the Great Mall. Unfortunately, this has not happen under the Obama Administration. Both Tim Geithner and Jack Lew — Obama’s two Treasury chiefs — had their photos on a milk carton because no one knew where they were and what they thought.
The question is how do you put these “genies” back in the bottle after they have been enjoying more celebrity status than the Treasury Secretary for the last eight years?
The bombastic Trump, when it comes to the Fed, could overwhelm the academics and eggheads at the central bank. We may get a taste of this on Twitter at 2:01 pm today from the President-elect on his reaction.