On Wednesday, during Federal Reserve Chair Janet Yellen post-FOMC meeting press conference, she described the recent inflation data as “noisy,” reported Business Insider.?
According to Morgan Staney’s Matthew Hornbach, he said the response represented the “biggest surprise of the FOMC press conference” and then from this characterization, attributed it to “the lion’s share of the market reaction.”?
So how did the market react??Stock markets jumped and volatility (as measured by the VIX) tanked.?
Hornbach added via Business Insider, “The Fed?s characterization of recent inflation readings as ?noisy? and the preponderance of evidence to the contrary (see Exhibit 1) leave us feeling as if the Fed is likely to dismiss most economic data deviations from slower-moving trend processes. Under the ?dismissive? framework, implied market volatility should increase less for a given economic surprise than under our previous framework ? a ?reactive? framework based on the idea that the Fed would be more data dependent. As a result, we turn neutral on implied volatility.”