Why This Fed Official Loves Doublespeak

Takeaway: Williams says something, takes it back, then dodges the question with a circuitous "on the one hand" that never truly resolves.

Why This Fed Official Loves Doublespeak - wash post


Our headline could have easily replaced the headline above, from the Washington Post's interview with San Francisco Fed President John Williams. Reading this interview is like watching a magician perform tricks, all smoke and mirrors and sleight of hand. 


Williams says something, takes it back, then dodges the question with a circuitous "on the one hand" that never truly resolves. Remember, Fed rhetoric has pivoted from hawkish (in December), to dovish (March), to hawkish (May), to dovish (June) and back to hawkish (July). So his view that Fed "strategy has not changed" is a tenuous argument at best. It's also worth noting that this is the same guy who forecasted up to 5 rate hikes in 2016. Also remember that what we've got so far is a big goose egg.


Here are two of the more elusive passages with no emphasis added because 90% of the statements are so obviously in conflict with each other...


Washington Post: So, just cutting to the chase here, does that gradual path of rate increases include any this year, in your view?


John Williams: In my view, it does. We’ve been adding enormous policy accommodation over the past several years. As the economy gets closer to its goals, we can again pull our foot off the gas a bit and hopefully execute a nice, soft landing over the next couple of years.


The challenge always is not only responding to your baseline forecasts but taking into account the various risks to the outlook. We think seriously about what’s happening globally. That has led to what I view as a little extra caution, a little more gradual pace of increases than I was thinking a year or so ago. That reflects a data-dependent approach to policy, but at the same time, fundamentally, the outlook hasn’t changed that much. We want to continue with a gradual path of increases. I don’t think that would interfere in any way with our growth continuing. That would not in any way stall the economy. I just think that would be consistent with the positive developments we’ve seen.


.  .  .  .


Washington Post: Back in December, when we saw the first rate hike, the argument that you’re making is the one Yellen made for getting started. But that argument seems to have fallen by the wayside as we saw headwinds from China, from Brexit, you name it. I’m wondering if there’s a reevaluation of whether or not that’s the right way to go.


John Williams: I would disagree a little bit with your characterization that we’ve given up on that strategy. It’s not just a semantic issue.


The strategy has two elements. Our policy that we laid out given our forecasts and our expectations of where the economy was going is that we’d be gradually raising interest rates over the next few years, moving back to normal. So that’s the broad strategy.


But within that strategy, we’ve been highlighting that this is not a preset course. The specifics of when we raise rates -- the steepness of that slope, if you will -- will depend on progress we make on our objectives and also changes to our outlook.


I would say our strategy has not changed. I would say that what has happened since December is that numerous events have occurred that have made the tactical execution of that strategy flatter in terms of the interest rate path than I was expecting. Because we haven’t taken action to raise rates, it kind of looks like we’ve changed, but I don’t think we have.

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more

We'll Say It Again: Leave Your Politics Out of Your Portfolio

If your politics dictates your portfolio positioning, the Democrats and #NeverTrump crowd out there have had a hell of a week.

read more

Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more