Financial Conditions
On March 30, Dudley outlined the five factors of financial conditions.
https://www.newyorkfed.org/newsevents/speeches/2017/dud170330
Below I have put all 5 (proxies) on a chart. The vertical lines are the last two Fed hikes.
FOUR of the indicators, stocks, ten year yield, the dollar index, and corporate spreads are actually showing LOOSER financial conditions (denoted with a “ + “ sign)
Short term rate as indicated by 3m libor has tightened.
In other words, the Fed really hasn’t tightened… perhaps balance sheet reduction will be more effective.
