Verklempt: so shocked and overwhelmed that we cannot speak.
That's the reaction Bill Gross and I had to the FOMC statement yesterday (and you can hear our LIVE reporting at the time in our Webinar Replay). CNBC says Steve Leasman was also verklempt as that Fed report was indeed shocking. Yes, we knew they might not raise rates (but I was sure enough to make it yesterday's headline that they wouldn't) but we didn't think they would LOWER their rate forecast by 30% over the next 3 years – that was STUNNING!
Note the red numbers highlighting the changes on the projected Federal Funds Rates – that was the shocker in yesterday's report and that was why I was wrong yesterday – because we were supposed to end the year at 0.9% average and that means we NEEDED to hike now because putting off the hike wouldn't give it time to get the average in line with the Fed's targets – it did not occur to Bill Gross or I that they would suddenly lower the targets.
This is not just putting off one raise, this is putting of 1/3 of all potential raises for the next 36 months and, before you grab your pompoms to celebrate infinite free money – think about the reason they are taking this action. Look at the top of that chart – long-term GDP projections are down 10%, from 2% to 1.8% – how is that a good thing? Inflation is 2% so the only "growth" in our economy is inflationary growth – that's pathetic!
Not as pathetic as Japan (yet) where the new crime against savers by the Central Banksters is being called "Yield Curve Control" where the BoJ will target 0% yield for the 10-year Japanese Government Bond, which had been negative for months. So it’s trying to push up the 10-year yield a smidgen. Shorter maturities would still sport a negative yield. This would steepen the yield curve. In effect, the BoJ will control the yield curve. By the end of next year, it might own 50% of all JGBs. As noted by Wolf Richter:
"Why even pretend there’s still a bond market? Maybe it’s just for