The US Fed Meet clearly signaled its intent on interest rates. While making all the right noises, the Fed still stopped short of what we thought it would do. The markets have some relief to gain from this position.
Raising rates or the imminent prospect of it will certainly be what the markets would not like to see anytime soon. The meeting seemed to carry the risk of that emerging. But, it ended up giving the markets more relief, time, and liquidity.
The liquidity can be reduced by the Fed this year. But, that seems to be a lesser bother to the markets than the raising of rates. Commodities will see the relief in their prices. But, the markets will still want to have clarity on the hope commodity prices will react to the Chinese Government’s interventions. If the cooling-off of prices does not happen, then we will have the prospect of a further rise. Overall, we are in a phase where liquidity will drive speculation crazy and then the extent of speculation itself will force central banks to reduce liquidity first and then raise rates later.
Every event will move us towards that phase and everybody in the monetary policy ecosystem is only trying to extend the time frames. Investors must be the ones to get the fastest finger first when it is time to press the exit button. But, for now, the fingers are going to press for more buy orders. Or, so the market mood tells us.
