With the Fed having lost most data-dependency credibility long ago, it also lost one of its most prominent mouthpieces, the WSJ's Jon Hilsenrath, whose predictions became as "valuable" to traders as the Fed's constant flip-flopping. Today, however, Hilsenrath makes a modest attempt to regain some of his former market-moving respectability, with an article in which he notes that as a result of the "dollar's relative softness" following recent central bank announcements, the Fed has "some room to breathe easier", suggesting that a rate hike may indeed be closer than the market (which does not price in the first full rate hike until 2017) expects.

This is what he just said:

In the year-and-a-half before the Federal Reserve’s December interest rate increase, the U.S. dollar rose more than 25% against a broad basket of other currencies. It is striking that so far this year the U.S. currency is down nearly 4% against the same basket. The dollar’s relative softness gives Federal Reserve officials one less reason to worry as they assess whether to raise short-term interest rates in the months ahead. 

If the currency were continuing to strengthen, that would make it harder for the Fed to push rates higher. A strong currency, by pushing down import prices, interferes with the Fed’s goal of lifting inflation to its 2% objective. It also undermines growth and hiring by crimping exports. The weaker currency works in the other direction, diminishing a worry about headwinds to growth and inflation as officials consider rate increases.

The dollar’s performance is especially striking now given developments last week. The Bank of England lowered interest rates and restarted a bond-purchase program aimed at boosting the U.K. economy. When another major central bank eases, that ought to boost the dollar. Strong U.S. jobs numbers, such as those released Friday, ought to push the dollar higher. While it did move up 0.4% last week, the gain was modest and wasn’t enough to offset earlier declines. Then it was little changed Monday.

Fed officials are watching the dollar carefully right now, as evidenced by a speech delivered in Indonesia last week by New York Fed President William Dudley. A close adviser to Fed Chairwoman Janet Yellen, he said a big appreciation of the dollar might need to be offset by the Fed by pursuing an easier policy path itself.

“If the economic outlook abroad deteriorates and this causes foreign countries to pursue a more accommodative set of monetary policies, then the dollar would likely appreciate?other things equal? reflecting expectations of lower interest rates abroad relative to U.S. interest rates. In this case, the U.S. may need to adjust its own monetary policy path. If the (Fed) did not make this adjustment, the stronger dollar could result in an undesired tightening of U.S. financial conditions.”

Other central banks are easing policy, but rather than surging as it did in the lead-up to the Fed’s December interest rate increase, the dollar’s rise appears to have stalled. That will make it easier for Fed officials to lift rates later this year if they become confident that the broader economic backdrop justifies a move.

If the Fed wanted to warn the market that a hike is coming, this is precisely how it would start. We now await Janet Yellen's Jackson Hole speech in two weeks to confirm (or deny) that this is indeed the case.

So with the Fed desperate to restore some of its own credibility, and now Hilsenrath doing the same, the only question is whether Hilsy's latest "Fed telegram" is a hint that the Fed will indeed hike in September or December, although since the former falls two months before a critical Clinton-can't-lose election, we doubt anyone seriously believes September is on the table. But an even bigger question is when the market, currently gripped by an unprecedented episode of complacency, decides when to price it in (i.e., sell off), in the process making any rate hike impossible once again and also destroying any credibility building attempt by the Fed... and its favorite mouthpiece.