Huge Disconnect Between Market and Fed: Rupkey

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June 18 (Bloomberg) -- Bank of Tokyo-Mitsubishi's Chris Rupkey, Stifel Nicolaus' Kevin Caron and Bloomberg's Josh Wright react to today's comments by Federal Reserve Chair Janet Yellen and debate the prospects for the U.S. economy. They speak with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)


Based on the comments we heard from janet yellen, does everyone take away that the economy is getting better almost all on its own?

I think a lot of people think the economy is doing better and the fed is there to help it get at her.

I think that is part of what we saw today in the market reaction as janet yellen said, i don't see a trade-off.

We still have a free hand for disruptive policies.

Does the economy remain in such a weakened state that the federal reserve needs to continue to play this role?

That is an interesting question.

Actually, i don't think there is a lot of slack.

I think the arguments for slack in the economy this far into the recession five years, i think it is dwindling by the day.

I was shocked at the market reaction.


Dot forecast went up.

But tell me what that is.

Each member is assigned a dot?

Yes, each member can vote where they think it will be.

It is kind of like pin the tail on the donkey.

You can look at the forecast like fed chairman bernanke told us to.

And the median is moving up.

The median moving up from december is dramatic, but the market did very little on that at all.

Kevin caron, how about the fed meeting minutes the stock market got nothing to chart away from what the perception was that the fed would do.

I agree with chris.

When i look at the data, there was some question about the inflation rate that it may be going up in the next few months.

Perhaps they might have to tighten that somewhat.

Bernanke said that we needed to watch the inflation rate.

They are important.

And now to chris's point, the forecasts are pointing to the fed needing to tighten.

But this is a more difficult situation.

Not only are they suggesting that the -- that they may need to tighten at some point, the ecb is moving in the other direction.

A lot of crosscurrents in monetary policy.

But that is an interesting idea about the idea of crosscurrents.

When you look at it, the dispersion of the dot is spread out a little bit more, suggesting that there might be some disagreement amongst policymakers about when to raise, how to hide to raise -- how high to raise.

There may be some this agreement about exactly what to look out upon.

Not just the expectations for policy, but the excitations for conditions.

That is the entire menu should expect to see as we move closer and closer to that liftoff date.

-- that is the difference you should expect as we seem to move closer and closer to that liftoff date.

What about employment?

There is still some slack there, but they still have the green light.

It is true they do not believe the economy needs as much support as it used to have, but they have already baked into those expectations for reducing the help to the economy they are providing.

Are there any demographic issues at work in the labor market that should change the fed's policy toward a specific level of unemployment?

There could be, but some of the participation rates for those, basically 25-50 five, that participation rate came down as well.

I think we are missing the point . only three out of 16 members do not see a fed's run -- fed fund rate at the end of 2016 of three percent.

If it's going to be 2.5%, then they've got to move the end of this year.

There is a huge disconnect in the market right now.

Do you agree with what chris says, that we get something by the end of this year in december?

Is the stock market prepared for this cap a no, i think the market is looking for something in the middle part of 2015. the other part of it is the fed has been overestimating growth.

A year ago at this time, there was the expectation that the u.s. economy would be growing something like 3.5%. today, they have come around to the notion that, well, we slipped on that target once again and it will be something much lower.

There is, perhaps some anticipation that the interest rates will not be going up as quickly as maybe chris is thinking.

And the ultimate growth rate in

This text has been automatically generated. It may not be 100% accurate.


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