What To Expect From FOMC Minutes? Market predictions and reactions - page 8
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So The Fed Didn't Raise Rates This Time...Get Over It. Here's How
According to my decidedly non-scientific survey, there have been 7,777 articles written this year (so far) on whether the Fed will raise interest rates, and when. The conclusion they’ve reached? Nobody knows — but everybody still gets a dime a word to speculate.
The conclusion I’ve reached? Who the hell cares when they raise rates? Whether in October or December or sometime later, they are going to raise interest rates at some point. They have to. In order to retain a shred of integrity, relevance and ink spilled, they must act. And in order to protect against another recession (not that they have that power, really, but we like to humor them) they need arrows in their quiver.
Let’s say for the fun of it that they raise rates in October by 0.25%. And again in December by 0.25%. Now they at least have 0.50% they can lower to maintain the illusion they can control the economy or at least “do something” when another economic malaise threatens. Does anyone really believe a 0.5% rise merits all this tearing of hair, gnashing of teeth, and spilling of ink? More interestingly, why do so many believe that any bit of good economic news warrants a triple-digit sell-off in the markets because then the Fed will feel secure in raising rates?
Markets go up because there are more anxious buyers than there are anxious sellers.
Put another way, if investor perception of the future value of their investment in Company X or Market Z is strong, persistent and optimistic, markets rise. If investor perception of the future value of their investment in Company X or Market Z is weak, agitated, and pessimistic, markets fall. Enough already of this incessant “will they or won’t they; only Janet Yellen’s hairdresser knows for sure.”
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St. Louis Fed Says Rate Hike Is Near
Whoa, not so fast, St. Louis Fed President said Monday on CNBC. Last week’s decision by the Federal Reserve to hold off on raising interest rates for the first time in nine years was widely perceived as a warning that the US economy is weakening and so tighter monetary policy isn’t on the near-term horizon. But Jim Bullard wants the crowd to dial down the revival in dovish sentiment and consider the finer points of the hawkish perspective. “There’s a powerful case to be made that it’s time to normalize interest rates,” he insists.
According to Bullard,
The goals of the committee have essentially been met. Unemployment is 5.1% and inflation, which is being driven down by oil right now, but if you strip that out and look at the Dallas Fed trim mean inflation’s about 1.6% year over year. That is about as close as we’ve been to our goal variables in 50 or 60 years. So the prudent thing to do is to start to inch your policy levers back to some kind of normal readings.
That’s certainly a different spin than the one that came out of Janet Yellen’s press conference last week. After all, if you say that the Fed’s mandate -- low inflation and full employment -- is as near as it’s been in the past half century, well, that’s a case for tightening if ever there was one.
Bullard, of course, isn’t a voting member of the FOMC at the moment. If he had been on team Fed, he says he’d have been a dissenting voice in last week’s near-unanimous vote to leave the Fed’s policy rate unchanged at the current zero-to-0.25% target.
Is that a clue for thinking that the prospects for a rate hike at next month’s FOMC meeting (Oct. 27-28) are back in play? So it seems (if you gorge on the hawkish meal that Bullard’s serving).
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Bullard is always pushed to save S&P when it plunges with statements like these. Nothing new from him
Bullard is always pushed to save S&P when it plunges with statements like these. Nothing new from him
It is always the same old story : FED blabs, ECB blabs, nobody does anything
Fed chief Yellen sets the stage for interest rate hike
Federal Reserve Chairwoman Janet Yellen stuck to her guns on Thursday, saying that an initial rate hike is likely to be appropriate this year.
In a speech at the University of Massachusetts, Amherst, Yellen said she expects inflation will return to 2% over the next few years as temporary factors currently holding it down will wane. Signs of weak growth overseas won’t prove large enough to have a significant impact on policy, Yellen said.
“Most FOMC participants, including myself, currently anticipate...an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter,” Yellen said.
The dollar rose after the speech was made. The market for federal funds rate futures had been pricing in expectations of an initial increase in January. Interest rates have been set near zero since the end of 2008.
For most of her speech, Yellen delved into reasons that she is confident that inflation won’t stay so low.
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Fed now listens to markets as intently as markets listen to Fed
It's fun to imagine the late Yankees great Yogi Berra as head of the Federal Reserve, and policy-makers seemed to be following a famous Yogi-ism when they declined to raise interest rates Sept. 17 despite unemployment having fallen below the threshold it previously set for "liftoff."
"When you come to a fork in the road," Berra once advised, "take it."
Before an outbreak of volatility in August, the Fed was expected to take the road to higher rates at its September meeting. Instead, the central bank went off in two directions, telling investors that rate increases were still on the near-term horizon while warning that a risky slowdown in global economic growth warranted staying on the easy-money path.
Usually, keeping rates lower for longer is bullish for stocks. Not this time. Investors were confused by Fed chair Janet Yellen's dual message and unnerved by her dovish comments.
In effect, investors wonder if Yellen and the Fed know something they don't.
That's on top of what some investors already know: that emerging markets are teetering on the edge of a major crisis. Two of the four so-called BRIC countries — Brazil and Russia —are in recession, and more alarmingly, China could be headed for a hard landing as well.
The looming crisis in emerging markets is an unintended consequence of the Fed's own ultra-loose monetary policy since 2008, which besides 0% interest rates include several rounds of bond buying. But because domestic loan demand remained sluggish, the cheap credit flowed into energy companies and emerging markets, creating excess capacity and high leverage.
With the Fed keen to begin normalizing policy rates, the resulting 15% rise in the dollar over the last year pushed up the cost of debt service for countries with dollar-based loans.
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Good article. FED is trapped. They can not hike rates and they will not. Currency war is taking its casualties
Citibank sees Fed on hold until March 2016
Cites possibility of government shut downCitibank is out with a their outlook on the Fed policy liftoff. Citing the possibility of a government shutdown, they now see the Fed keeping policy on hold through October and December and see liftoff occurring in March 2016. The Fed does meet in January but there is no scheduled press conference.
Finally a bank that told what everybody knows : FED is not going to hike rate this year. period
Fed's Lacker says rate rise is possible in October - Livesquawk
Fed's Jeffrey Lacker hitting the wires
Lacker sits right at the top of the hawk tree