The US Federal Reserve's indecision making markets nervous

Market participants were scarcely off their recent rebounded confidence at the start of the week heading into a crucial week for the US Federal Reserve whose annual Economic Policy Symposium to be hosted in Jackson Hole, Wyoming from the 25-27th August evolving into an uncertain distraction away from the focus on buoyancy driving markets higher.  

The annual symposium sees Fed officials from around the United States gathering in one place to discuss economic circumstances the country is absorbing as a result of monetary policy implemented throughout the year. This year's theme: Designing Resilient Monetary Policy Frameworks for the Future giving a good idea what might be on many officials minds.

Last week we saw the Fed release the FOMC minutes of the meeting that happened in July which highlighted a deep divide amongst members in deciding whether the US economy was strong enough to sustain an interest rate hike. Some prominent regional members such as William Dudley, president of the New York Federal Reserve expressed his view that the central bank couldn't wait much longer to implement the second round of rate hikes whilst relaying a tone that set the scene for an imminent increase expected in September.

Needless to say his thoughts weren't shared amongst all decision makers with half the participants opting for a stay of execution in favour of  more evidence from economic data regarding the strength of the economy.

Yellen’s speech at Jackson Hole set to dominate mood on Wall Street https://t.co/zyTWExtoO2 pic.twitter.com/ej5XYOfeys

— Yahoo Finance (@YahooFinance) August 22, 2016

I wrote an article about this dilemma the Fed had found itself in saying the split in opinion was creating uncertainty in markets which would be met with trepidation. I went further on to discuss two possible scenarios that could happen depending on the type of action the Fed decided to take saying it was likely for them to buckle under the pressure of global policy alignment that's become the norm over the past few decades and follow its developed nation peers in pushing for softer monetary conditions from a low base.

Yesterday we heard another prominent figure, vice chairman of the Federal Reserve Stanley Fischer reiterating Dudley's comments on the strength of the economy and necessity of an interest rate hike. He said the Fed's target's were close to being met on most economic indicators with positive remarks about employment but recognising the economy has done "less well"than hope for.

It's getting down to crunch time for the Federal Reserve to choose the direction of its course with both outcomes having major impacts in the long term scheme of things.

The Fed's integrity may have suffered in the months gone by since implementing the first interest rate hike in December while over confidently saying it expected to hike rates four times in 2016, a statement I had said showed the miscalculation of an influential policymaker.

This possibly provides an explanation why some FOMC members have come out strongly with the intention to hike conscientiously knowing how important integrity remains in building trust with the public in the decision it takes. The absence of such virtue evades policymakers from any conviction on the part of participants in finding relief in future intervention measures and thus a failure in its effectiveness.