EDITOR NOTE: A Fed tool that’s received more media spotlight in recent months is its “dot plot.” The dots map out policymaker’s expectations as to where interest rates might be headed in the future. That’s what it “aims” to do. It inoculates financial markets from policy surprises, assuming some margin of deviation in that forecasts can sometimes change on a dime. Apparently, the Fed’s ultra-dovish Neel Kashkari opposes rate hikes and disagrees with the dot plot’s function: "It was meant to be a tool providing dovish forward guidance. It ended up being a tool that provided hawkish forward guidance ... I continue to think we ought to just kill the dot plot." So, by analogy, if a well-functioning “ruler” is supposed to give you an objective measure, and if you don’t like the measure, do you then blame the ruler?
- Minneapolis Fed President Neel Kashkari has weighed in with where he stands on the dot plot, telling Reuters that he opposes rate hikes through 2023.
- The Fed's latest dot plot on Wednesday showed that the majority of FOMC members had moved up expectations for tightening, with at least two quarter-point hikes penciled in for 2023.
- "The vast majority of Americans want to work, and I am not ready to write them off – and I want to give them the chance to work," Kashkari said. "As long as inflation expectations remain anchored ... let's be patient and let’s really achieve maximum employment."
- "I still have no hikes in the SEP forecast horizon because I think it’s going to take time for us really to really achieve maximum employment, and I do believe that these higher inflation readings are going to be transitory," Kashkari said.
- Earlier, St. Louis Fed President James Bullard put pressure on stocks from the opening bell saying he wants a hike in 2022.
- The S&P (NYSEARCA:SPY) -1% pared losses just slightly after Kashkari's comments hit. The 10-year Treasury yield (NYSEARCA:TBT) (NASDAQ:TLT) is steady, still off 6 basis points to 1.45%.
- Kashkari, a voting FOMC member in 2023, is considered one of the most dovish members of the Fed.
- Of the dot plot, Kashkari said: "It was meant to be a tool providing dovish forward guidance. It ended up being a tool that provided hawkish forward guidance ... I continue to think we ought to just kill the dot plot."
- The Fed has lately asked investors to either trust the dots or not.
Original post from Seeking Alpha