Fed Walk Back

Relax said the night man
We are programmed to receive
You can check out any time you like
But you can never leave
--Eagles

Yesterday's FOMC announcement verified what markets have been sniffing out for weeks--that the Fed is caving to pressure to stop their rate hike program. There is also chatter that the Fed will quit selling their bond portfolio a little early--perhaps after peeling only a couple hundred billion$ in assets from their $4.5 trillion balance sheet. Pre QE, the Fed's balance sheet was about $0.5 trillion large.

It took only a 10-20% pullback in stocks (following a 2-3x move higher in major stock indexes since the commencement of aggressive monetary policy) for the Fed to ease off the brakes.

Some believe that merely stopping the tightening will not be enough to keep the bubble from popping. Not sure about that. Real rates are still negative, credit money is still being created out of thin air, and all of the money created by $4 trillion in QE bond buying (and multiples of that created by ECB, BOJ, and other central banks) seems like the stuff of big inflation to me.

The Fed's policy walk back reiterates what we already knew. Central banks have checked into a monetary roach motel that they can't leave.