• Kashkari: “We should have waited for more data”
  • Sole dissenter in the minority in wanting to keep rates on hold
  • Gold set for second successive weekly inverted hammer

On Wednesday evening the Fed announced a 25 basis point increase to their base rate as was widely expected. However one of the voting members, Kashkari, dissented to the decision believing that the central bank should stand pat. Kashkari has been speaking this afternoon and explaining his decision with the following selected comments summarising his decision making process and his view on monetary policy:

  • We should have waited for more data to see if the recent drop in inflation is transitory.
  • We’re getting closer to full employment, I’m not sure we’re there yet
  • It doesn’t appear Fed is moving closer to inflation goal
  • Should have delayed hike and waited for more information on inflation
  • Tools for high inflation are more effective than low inflation
  • Calls the release of plan to unwind balance sheet a positive step
  • The cost of labor isn’t showing signs of building inflationary pressures that are ready to take off and push inflation above the Fed’s target.
  • It seems unlikely that the United States will experience a surge of inflation while the rest of the developed world suffers from low inflation.
  • Some argue that the recent decline in inflation is transitory, but we don’t know that for certain.
  • I believe it is prudent to assume no change in the fiscal outlook.

Dissent has been a common them for central bank decisions this week but in contrast to the BoE which saw three members dissent, the sole dissenter in the US didn’t come close to gathering the support required to keep rates on hold.   

Gold was one of the markets that showed the biggest reaction to the Fed decision and accompanying statement. The precious metal was set for a day of substantial gains before stopping in its tracks and then reversing as chair Yellen reiterated the less-dovish stance. Gold is looking like it may print its second successive weekly inverted hammer as rallies have provided good selling opportunities in recent sessions. A break below 1245 would also see a rising trendline break and could lead to further declines. 

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 Gold looks set to post a second successive weekly inverted hammer. A break below 1245 could lead to significant declines