A French multinational bank headquartered in Paris, Société Générale, has stated that the Federal Reserve is sending mixed signals and losing credibility, Bloomberg Business reported.
For the entirety of 2015, markets and economists have been paying close attention to the Federal Open Market Committee’s decisions on monetary policy to anticipate when the Fed will raise the federal funds rate.
Fed Chairwoman Janet Yellen alluded to interest rates being raised by the end of 2015.
"There are two different kinds of credibility for central banks that matter for markets: whether monetary policymakers do what they say they will, and whether those actions are perceived to lead to the successful completion of their respective mandates," states Bloomberg.
But according to SocGen, some market participants are concerned that Yellen won’t do as she said because the odds of an interest rate increase have gone down.
"SocGen’s observation is just the latest in a series of signals that markets are losing faith in central bankers—in particular, their ability to hit inflation targets, which suggests that the other side of the credibility coin, the efficacy of monetary policy, is also under siege," states the article. "Market participants have started to question the effectiveness of monetary policy, with good reason."
"It is for this reason that SocGen believes monetary policy will continue to ‘take a back seat’ in the fourth quarter, with China and earnings serving as the two key determinants of returns until year’s end."