I must be missing something because the Fed statement looked more hawkish than I expected and the DOW is up 200+ points. I mean I wouldn’t have guessed it with the ending of QE despite chatter about extension in the face of global deflationary pressures, the release of details of the reverse repo with the intent of shrinking the money supply without shrinking the money supply (accomplishment of which seems a bit impossible to me), and this little “gem” from the statement:

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The Committee anticipates, based on its current assessment, that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program this month, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored. However, if incoming information indicates faster progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

So the FF rate won’t be moving as long as inflation remains below 2% (LOL!) with the caveat that if it proceeds faster than anticipated, then we get suffer through raising the FF rate sooner rather than later angst. Then, it says it will take a balanced approach when it decides to remove accommodation, meaning wishy, washy more of the same, too low inflation and too low employment – but happy central bankers who get to tighten for the heck of it, still not meeting the mandate of managing monetary and credit aggregates commensurate with the economy’s long-run ability to increase production.

And the condition of slower progress toward the objectives shows that the FOMC decides to err on the side of less rather than more – intent on doing nothing about economic stagnation while being in a bit of a hurry to tighten the screws if inflation starts to rise.

And they refer to Yellen as dove. That’s got to be some kind of joke.

Maybe sometime after the first quarter it will be time to rethink investment strategies. Because I don’t really see a possibility of avoiding the scenario of moving one step forward and taking at least two steps back for 2015. Kocherlakota voted against the statement saying that the committee should be more focused on hitting the inflation target. I don’t necessarily agree with that, but at least it would focus the committee on something nominal for a change, and he knows how the minds of the hawks work. Richard Fisher and Charles Plosser voted for it, and so I don’t really have to think much about it to be reasonably certain it won’t end well… Just as Mr. Bullard said…

PS: And don’t forget about the political situation – The GOP positioned to take over the Senate with at least two seats empty on the BoG. I read a few weeks ago that the party has a 81% probability for the Senate. Yesterday, ABC news reported a more modest 64% chance. But ABC tends to be biased toward the Democrats in their political reporting – and so it’s probably somewhere in between.