The news from Jackson Hole's recent conference where Fed Chair Janet Yellen put her mincing words act on display again, according to some sources, there's mounting pressure on the Fed to clarify part of the language they've used to describe their potential rate-hike program.
The Fed meets again next month on September 16-17. One of the terms under question by market participants is the use of "significant" to describe the amount of slack in the labor market, a description that the Fed has been tossing around for over a month.
Another term bothering investors is the assertion rates will remain low, near zero, for a "considerable time." But even so-called little terminology tweaks now could be dangerous as, in our view, the Fed has painted itself into an increasingly uncomfortable corner.
And we are not alone in that. According to news reports a while ago, Philadelphia Fed President Charles Plosser, a noted hawk, raised the issue at a Fed meeting in July. "The language puts us in a box that I think is not a good box to be in," he reportedly told Reuters this week at Jackson Hole.
The objection here is timelines and calendar dates, both of which can created disappointing expectations because no one for sure knows what will happen in the interim. In the quote we read, Plosser mentioned that he preferred "simple data-dependent" guidance.
That's a bit shocking coming from anyone at the Fed, but we'll take it for now. The point is the doves and the hawks are gearing up for what could be a shootout at the old Eccles Corral.
At this point any tweaking of the language could send shudders into investor portfolios and cause some volatility many of them won't necessarily enjoy.
t. man hatter
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