Traders are starting to doubt the U.S. Federal Reserve (Fed)’s command of monetary policy, according to Societe Generale’s famously pessimistic strategist, Albert Edwards.
There is “increasing evidence of a loss of confidence that the Fed is actually in control”, after its rate-setting committee, led by Chair Janet Yellen, seemed to brush aside concerns about deflation by choosing not to raise interest rates at its September meeting, Edwards argued in a research note.
Yellen cited concerns about instability elsewhere in the world when she spoke about her decision. The Fed has since been criticized for assigning too much importance to market turmoil elsewhere, rather than focusing on the U.S. domestic economy, when making its call. There have also been concerns that uncertainty of when rate rises will happen is now more of a drag on stock markets than a small rate rise, which has been long expected, would be.