Bloomberg lance une attaque verbale contre la Fed : « Les graphiques en points sont le plus grand chaos du marché et devraient être supprimés pour réduire l'impact économique ».
Clive Crook, a Bloomberg columnist, pointed out that the 'dot plot' of the Federal Reserve has become a source of market confusion. He suggested that it should be eliminated in the review of monetary policy and instead focus on real-time data analysis to improve policy communication and reduce economic impact. (Background: The US November PCE index was lower than expected! Is inflation under control? Federal Reserve officials expect a significant decrease in interest rates next year.) (Background: Taiwan's central bank has frozen interest rates for 3 consecutive times. 'Yang Jinlong has not called for the eighth wave of housing market measures,' but the 7.5th wave of housing market measures has quietly struck.) Yesterday (30th), Bloomberg columnist Clive Crook suggested that the Federal Reserve should consider canceling the 'dot plot', which was originally used as a tool to convey policy signals but has instead become a source of market confusion. He believes that focusing on real-time data rather than future predictions can make policies more adaptive and better meet actual needs. Federal Reserve's policy communication mistakes The Federal Reserve's 'dot plot' in December At the policy meeting in December, the Federal Reserve lowered interest rates by 25 basis points to 4.25%-4.5% and simultaneously adjusted inflation and economic growth predictions. However, this combination of policies was interpreted by the market as a 'hawkish turn', causing the stock market to decline. The Bloomberg commentary pointed out that the Federal Reserve's communication method has exacerbated the challenges of policy implementation. Crook believes that the market's misinterpretation of Federal Reserve's policies is partially due to the economic forecast summary and 'dot plot' it publishes. These tools not only fail to clearly convey policy intentions but also cause market reactions to deviate from actual policies due to discrepancies between updated data and actual policies. Taylor rule deviation from policy Using the Taylor rule as a benchmark, the Federal Reserve should have kept interest rates unchanged at the December meeting. However, strong market expectations for interest rate cuts led the Federal Reserve to implement a rate cut to avoid the market interpreting no rate cut as a policy tightening. Crook pointed out that this 'passive accommodation' to the market may make future policy adjustments more difficult. The Taylor rule is one of the famous simple monetary policy rules. It was proposed by John Taylor in 1993 and uses a simple formula to adjust the nominal neutral interest rate based on the inflation gap and output gap to calculate the appropriate level of the federal funds rate. It can be used as a reference for the Federal Reserve's future interest rate decisions. Issues with the 'dot plot' Crook mentioned that the 'dot plot' is not a policy consensus but a trend of interest rates drawn by individual officials based on their personal expectations. However, the market often sees it as a plan or commitment, further confusing policy messages. He suggested that the Federal Reserve should cancel the 'dot plot' and shift the focus to the interpretation of real-time data rather than outdated future predictions. Crook emphasized that the Federal Reserve should pay more attention to the real-time implications of data and avoid disconnecting from the actual situation due to excessive reliance on predictive tools. Especially in policy reviews, a significant reform or even abandonment of the 'dot plot' would help reduce market misunderstandings of policies and enhance economic stability. Related reports: The US November PCE index was lower than expected! Is inflation under control? Federal Reserve officials expect a significant decrease in interest rates next year. Taiwan's central bank has frozen interest rates for 3 consecutive times. 'Yang Jinlong has not called for the eighth wave of housing market measures,' but the 7.5th wave of housing market measures has quietly struck. Federal Reserve megaphone: The end of the era of ultra-low interest rates, Trump holds the key to interest rate cuts in 2025. (Bloomberg)
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Bloomberg lance une attaque verbale contre la Fed : « Les graphiques en points sont le plus grand chaos du marché et devraient être supprimés pour réduire l'impact économique ».
Clive Crook, a Bloomberg columnist, pointed out that the 'dot plot' of the Federal Reserve has become a source of market confusion. He suggested that it should be eliminated in the review of monetary policy and instead focus on real-time data analysis to improve policy communication and reduce economic impact. (Background: The US November PCE index was lower than expected! Is inflation under control? Federal Reserve officials expect a significant decrease in interest rates next year.) (Background: Taiwan's central bank has frozen interest rates for 3 consecutive times. 'Yang Jinlong has not called for the eighth wave of housing market measures,' but the 7.5th wave of housing market measures has quietly struck.) Yesterday (30th), Bloomberg columnist Clive Crook suggested that the Federal Reserve should consider canceling the 'dot plot', which was originally used as a tool to convey policy signals but has instead become a source of market confusion. He believes that focusing on real-time data rather than future predictions can make policies more adaptive and better meet actual needs. Federal Reserve's policy communication mistakes The Federal Reserve's 'dot plot' in December At the policy meeting in December, the Federal Reserve lowered interest rates by 25 basis points to 4.25%-4.5% and simultaneously adjusted inflation and economic growth predictions. However, this combination of policies was interpreted by the market as a 'hawkish turn', causing the stock market to decline. The Bloomberg commentary pointed out that the Federal Reserve's communication method has exacerbated the challenges of policy implementation. Crook believes that the market's misinterpretation of Federal Reserve's policies is partially due to the economic forecast summary and 'dot plot' it publishes. These tools not only fail to clearly convey policy intentions but also cause market reactions to deviate from actual policies due to discrepancies between updated data and actual policies. Taylor rule deviation from policy Using the Taylor rule as a benchmark, the Federal Reserve should have kept interest rates unchanged at the December meeting. However, strong market expectations for interest rate cuts led the Federal Reserve to implement a rate cut to avoid the market interpreting no rate cut as a policy tightening. Crook pointed out that this 'passive accommodation' to the market may make future policy adjustments more difficult. The Taylor rule is one of the famous simple monetary policy rules. It was proposed by John Taylor in 1993 and uses a simple formula to adjust the nominal neutral interest rate based on the inflation gap and output gap to calculate the appropriate level of the federal funds rate. It can be used as a reference for the Federal Reserve's future interest rate decisions. Issues with the 'dot plot' Crook mentioned that the 'dot plot' is not a policy consensus but a trend of interest rates drawn by individual officials based on their personal expectations. However, the market often sees it as a plan or commitment, further confusing policy messages. He suggested that the Federal Reserve should cancel the 'dot plot' and shift the focus to the interpretation of real-time data rather than outdated future predictions. Crook emphasized that the Federal Reserve should pay more attention to the real-time implications of data and avoid disconnecting from the actual situation due to excessive reliance on predictive tools. Especially in policy reviews, a significant reform or even abandonment of the 'dot plot' would help reduce market misunderstandings of policies and enhance economic stability. Related reports: The US November PCE index was lower than expected! Is inflation under control? Federal Reserve officials expect a significant decrease in interest rates next year. Taiwan's central bank has frozen interest rates for 3 consecutive times. 'Yang Jinlong has not called for the eighth wave of housing market measures,' but the 7.5th wave of housing market measures has quietly struck. Federal Reserve megaphone: The end of the era of ultra-low interest rates, Trump holds the key to interest rate cuts in 2025. (Bloomberg)