Washington to Wall Street

Kudlow's Quick Take

The Fed Is Freaked Out about the Financial Markets
Because it is completely misreading the situation.
By Lawrence Kudlow, Feb 3, 2016

Early in the new year, on Sunday, January 3, Federal Reserve vice chair Stanley Fischer delivered a hawkish speech to the American Economic Association. Completely misreading the economy, which is woefully weak while inflation is virtually nil, Fischer strongly hinted that the Fed would be raising its target rate by a quarter of a percent every quarter for the next three years.

The next day the S&P 500 dropped 1.5 percent. In the week that followed, the broad index fell 6 percent. The week after that it fell over 2 percent. During that two-week period, the Dow Jones dropped 1,437 points.

The dollar went up. Oil plunged 21 percent. Raw material commodities dropped. And credit risk spreads in the high-yield junk market rose substantially.

Actually, it was a global event, as stock markets around the world plunged. Utter chaos...

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