Futures Jump After Bill Dudley Hints At Fed “Policy Error”, Warns Of “Significant Consequences” From Strong Dollar

With the market now predicting virtually zero rate rate hikes for the rest of 2016…

… the Fed will have to take a machete to its next exercise in erroneous group think known as the “dot plot”, when it will have to admit it was dead wrong about the state of the US and global economy.

But while until now most Fed speakers have sounded consistently hawkish and steadfast in their views of 4 rate hikes for the rest of the year – with the exception of a more downbeat Vice Chairman Stanley Fischer eariler in the week – moments ago in an interview with Market News, NY Fed president Bill Dudley gave the first official admission of a “Fed relent”, aka policy error, whenhe made it clear “he and his fellow Fed policymakers will have to discern at their March Federal Open Market Committee meeting whether or not the plunge in stock prices and other adverse market developments cloud prospects for U.S. economic growth, employment and inflation.”

From Market News:

Top Federal Reserve policymakers are leaving little doubt the financial turbulence and souring of the global economy could have significant implications for U.S. monetary policy, but they are loathe to draw too many conclusions about the appropriate path of interest rates at this juncture.

One thing is for certain: The tightening of financial conditions that has taken place since the Fed began raising short-term rates in mid-December is a matter of considerable concern to the Fed, New York Federal Reserve Bank President William Dudley said in an exclusive interview with MNI Tuesday.

But, it was supposed to signal the US economy is “strong enough” to sustain a lift off and decouple from the rest of the world which is scrambling to cut rates. Guess not.

As MNI adds, “a weakening of the global economy accompanied by further appreciation in an already strong dollar could also have “significant consequences” for the U.S. economy, Dudley told MNI.”