Change that tune!

Another day, and two more Fed speakers clamber down off of the fence to come out in favour of more tightening as early as April.  While neither Williams nor Lockhart will be confused for a member of the Fed's dovish coterie (dubbed "the Internationalists" for the time being, until a new rationale for standing pat is required), that both came out apparently contradicting the tone of last Wednesday's Fed statement and press conference is certainly curious.

Perhaps it's just coincidence that the first three speakers after last Wednesday were in favor of more tightening soon (though in Bullard's case, only recently so.)  It's hard to credit that developments over the last week could possibly have changed anyone's mind.   Sure, breakevens have widened...but that just continues a trend that was already well in train at the time of the meeting.

A literalist might argue that everything that the recent trio said is consistent with what was in the statement and the dot plots.  Perhaps...but there's a cornucopia of evidence that virtually nothing the Fed says can be taken literally, particularly the dot plots.   It will require confirmation from another fence-sitter or erstwhile dove to actually deliver, but as things stands it looks like there may well be 4 votes already for a hike next month (the trio above plus Esther George.)  It's tempting to step into the breach once more on the short end; Jan Fed funds is pricing just over one rate hike by year end, and in the grand scheme of things the pullback after Wednesday was fairly modest despite the dovishness of the release.   That divergence is telling.

A fanciful alternative explanation for the apparent volte-face is that a few members of the FOMC nipped down to the pub after Wednesday's meeting and sank a few pints.  One can imagine the banter after a few jars of Stella, with Bullard, Lockhart, and Williams challenging each other in a modified version of "Name That Tune."

Williams:  Boys, I can change that tune in six days.

Lockhart:  Guys, I can change that tune in four days.

Bullard: Lads, I can change that tune in just two days!

Williams and Lockhart:  Jim, change that tune!

This amusing scenario raises the question of what other game shows that central bankers or other market participants might wish to play.

The Price is Wrong:  Contestants play a number of amusing and silly little games to try to get prices correct, failing more often than not.   Culminates in the Showcase Showdown, where participants are tasked with pushing price levels close to an inflation target without going over.  Sadly, most come nowhere near.   (Macro Man struggled mightily, and successfully, to avoid linking to an Adam Sandler film for this one.)

Wheel of Fortune:  Contestants spin the wheel, which lands on various sizes of asset purchases, and then try to spell out how it benefits the real economy rather than merely holders of financial assets.

Jeopardy!:  At press conference time, central bankers have all the answers...but can journalists ask the right questions?  The show's title refers to the profitability of  punters' eurodollar positions (US version) or euro/dollar positions (European version) at each episode's conclusion.

Who Wants To Be A Millionaire?:  Old version:  retired central bankers hit the lecture and dinner circuit, running a gauntlet of private sector meetings and trousering as many juicy consulting fees as possible while their views remain relevant.  New version:  Billionaire hedge fund managers buy dodgy pharmaceutical stocks or go limit short JGBs.

Countdown:  A staple among the UK student and pensioner communities, in round one contestants are given a jumble of letters and are required to come up with monetary policy programs.   LSAP, TALF. SMP, APP, and CSPP are just a few of the famous winning entries.  In round two contestants are given a semi-random collection of economic data and are required to meet an arbitrary inflation target (or come as close as possible.)   The show's title refers to the price action in bond yields as they are attempting to complete each round.

Press Your Luck:  Fund managers with profitable positions that have had a nice run attempt to navigate the market and add to their winning trades without running into a dreaded "Whammy" that takes away all their gains.  Managers do have the option of eschewing further attempts and settling for the profits that they have.

Readers are of course encouraged to contribute their own ideas.  In any event, Macro Man had better end here, lest he enter his own version of "Family Feud."