How does the Bank of Canada and the Federal Reserve determine interest rate changes?! PSA | Page 4 | General financial discussion | Discussion forum

smayer97 said

It is much simpler than that. I also read your other reply on the other related thread here. But as I said there, it does not matter what the CB wants to do or happen. The market has to move to accommodate and if it does not, the CB will not change rates beyond what the market moves. So I submit that to see what the CB will most likely actually do, the chart is the best indicator.

It's like I described here, the actual price (rate) is determined by the Bid matching the Ask. Until then, there is no movement. The CB may be placing their "Ask" but the market is placing their "Bid". And the charts capture the result, which is what matters, because that is actionable...  

U ever witness bond markets trades lower in rates after the CB indicated their next move is a hike (from a neutral stand) or vice versa ?
If not, that’s the proof who leads who,

smayer97 said
not that simple... it might be an indication that a peak has been reached ... but I look at that in the context of patterns, trends, historical longevity of trends, and the sustainability of trends. And based on my financial needs or expectations, I'd decide to ride it or not, and for approx how long, weighing in potential risks, adjusting along the way.  

In other words, your bulletproof method of making money = bet based on gut feel.

smayer97 said
First, you seem to have narrowed the criteria, with the CB changing positions...

I have not kept records but I am saying that I have seen enough examples where the market did go in a different direction than the CB was wanting to go. Services I have followed have captured many of these.

Again, to be clear, I am not denying that the CB tries to move the market in a certain direction by making certain statements. Just because the market might be moving the same direction, it is a reflection that the market has already determined the direction, since they are operating on the same data... but the market precedes the CB moves. The fact that the CB then moves in that direction may give the impression that the comments from the CB caused the move.

But again, it is not what the CB says that matters but what the market actually does, which are not always in sync. And the charts capture what actually takes place.  

The bond traders adjust the bond yield every day if not every minute, and do so after EVERY economic data comes out (there are quite a few that are meaningful that don’t get mentioned in the regular news as normal Joe won’t know what it is anyway)
CB publish its statament only at every meeting, and then drop hints from time to time during other meetings during interview etc, but certainly not every day.
That does not mean / imply CB ends up just following what the the bond market does at the next meeting, hard from the truth.
Like I said, emergency cuts are perfect example of CB leads the change, even if you observe rate drops before CB actually cuts, that’s only because it’s expected by the traders. The most significant proof was the back to back 50bps emergency cut during the financial crisis.
Maybe if you actually sat on a trading floor during that time and was actually rates trading, you would hear the roar of the disbelief of traders at the time. If I remember correctly, the time was also post 3pm 4pm ish which was unheard of for CB to make emergency moves that late. Market was totally caught off guard.
For normal times what you observed appears to be what you described, but far from the truth. Also bond market is only doing what the CB said 8 weeks ago, so don’t need that to ‘predict’ the actual CB action, cuz we were already ‘told’.

RetirEd said
Will somebody please call the glue factory?  

Apparently, in some countries it's a delicacy. Not sure how much would be left over for the glue factory in that case.