Yellen's dovish comments spells over optimism to hike rates by Fed officials

You would think that the hype built around the anticipated interest rate hike the market had been expecting from the Federal Reserve in almost ten years that consequently caused the US Dollar to strengthen way beyond thought would've provided certainty to markets but instead has brought on more worry and concerned that's fuelled the flames of unpredictability.

This after Fed Chair Janet Yellen spoke at the Economic Club of New York yesterday during a speech striking a more dovish tone than most had expected.

The problematic situation the Fed finds itself in at present falls squarely on the fact that it had delayed the process of the inevitable interest rate hike and fallen into the trap of leaving it too late by implementing constrained policy in times of great distress throughout the world. Things become worse when you look over the oceans to neighbours Europe and Japan who both initiated negative interest rates due to unresponsive economic activity.

Divergence between policy direction amongst developed economies suggests a decoupling of a common agenda to drive world growth in harmonious tandem. The Fed has committed itself to the normalisation process whereas other central bankers have opted to continuing pushing the extremes of monetary policy stimulus. This effectively deems the Fed's current stance void of any chance at succeeding as alignment has become a frequent feature in deciphering the types of measures used to revive or pull brakes an economy.

Janet Yellen's comments that the Fed is looking to "gradually"lift rates to a reasonable pace are signs that the decisiveness that once stood firm at the central bank is beginning to shake with doubtfulness over whether the current view of tightening policy is the correct decision and perhaps an indication that the over optimistic nature of FOMC members may have created expectation that the US economy could fend off more than one interest rate hike.

However its a double edge sword because the more the Fed holds off on hiking rates the more concerned the market gets as the bleakness simply reaffirms the calamitous outlook many are believing to occur.

Yellen's super dovishness creates confusion https://t.co/EC855KAhaT pic.twitter.com/sehG11jN9V

— CNBC International (@CNBCi) March 30, 2016

In fairness to Miss Yellen, the normalisation process cannot be seen as an ordinary event that takes place during the normal course of economic activity. The situation the world's found itself in is not ordinary and the measures applied so far highlight the extent policymakers have gone too to prevent the worse financial devastation since the Great Depression.

My greatest fear at the moment is it may be too late in the game for radical policy shifts from world governments that have been called for from many corners of the economy and as a result of the inaction a new economic catastrophe may emerge. If this were to happen there would be considerable less room for governments to fix the problem and even less leverage from exhaustive monetary policies.

This allows for very little maneuvering space to be flexible and would force politicians to finally confront the structural issues their economies having been facing for a number of years that keep getting delayed due to unpopularity amongst ordinary citizens. The unfortunate truth is you cannot reap the benefits of the system for which you haven't laid an ounce of work towards and the reality is going to come down particularly hard on those who have found commonplace in these conditions.

Observing the rhetoric from key figure in the central bank world would suggest that the tone once used to bring excitement back into the mixed is starting to wear thin with critical examples of that coming from the ECB and BOJ. Added stimulus measures have yet to drive markets forward with the latest statement by Yellen being the bone of contention between those who believe monetary policy still has the ability to add kick to the economy and those who believe the clock is ticking towards the next economic implosion.

Whether the latter or the former proves true will form the importance of our assessment of markets over the next month with much attention needed to be pointed in the direction of riskier assets and their ability to produce returns they've failed to generate thus far this year.