What Will Happen at Next Fed Meeting? Look to the Labor Market

NEW YORK (TheStreet) -- When it comes to setting policy, it's now clear that the Federal Reserve is focused on the labor market. 

Writing earlier this week, I suggested that the Federal Reserve consider the strengthening dollar in this week's meeting. The Fed didn't listen, sending the dollar lower, following the announcement that interest rates wouldn't be raised. 

As James Ramage noted in the Wall Street Journal, the Fed disappointed the market. Not only did the Fed not raise short-term interest rates at the meeting, it "again lowered both its U. S. growth forecast and its interest-rate projections...That was a cue for investors to sell the dollar."

And the turn began immediately upon the notice of the meeting's result. "After gyrating in the initial minutes following the release of the Fed statement, the dollar wavered but then took a downward turn for the duration of Ms. Yellen's news conference," he wrote.

Another market noticed the policy stance coming out of the meeting. Almost immediately, the stock market began to rise, and rise pretty dramatically. And, the strong rise continued into and throughout Thursday.

As it has been since the Great Recession, the Federal Reserve continues to focus more on the labor market, something it really cannot control, and continue to ignore what is happening to the value of the dollar, something over which it has obvious sway.

It should be noted that the Federal Reserve did not intentionally do anything to encourage a strong U.S. dollar. It just happened to be at a different stage of the policy cycle that most every other central bank in the world. This is especially true in the case of the European Central Bank and the Bank of Japan, which are both in various stages of their own quantitative easing programs.

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