The FOMC policy statement shows-toned down “dovish” phrases

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Back in March, Chair Yellen, perhaps mistakenly, said that a “considerable time” was six months. Then, at her September press conference, she said “a considerable time” isn’t mechanical, shouldn’t be read explicitly in calendar terms, will be data dependent and could come sooner than many expect. In other words, it could be three months, or if data weaken, it could be 12 months. Given that current economic data are solid, as the Fed acknowledges (see more on that below), a “considerable time” is likely to be shorter rather than longer. In other words, to me, Chair Yellen’s comments go a long way toward weakening the Fed’s dovish language.

Conference board LEI

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Market Realist – The above graph shows the Conference Board’s leading economic indicators index (or LEI). The forward-looking index is used as an indicator of changes in business cycles. The index is made up of 11 components, including average workweek, new orders, initial jobless claims, prices of commodities such as gold (GLD), silver (SLV), and industrial metals, building permits, stock prices, and money supply. The index increased by 1.1% in July and 0.2% in August, indicating solid strength in the U.S. economy.

U.S. equity markets have been responding positively to the strong economic news. The S&P 500 (SPY)(IVV) is up almost 8% this year, while the Dow Jones Industrial Average (DIA) has had 18 record closings in 2014.

Read on to the next part of this series to learn why the Fed’s revised dots chart indicates a hawkish stance.

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