Tag: interest rates

A Fed Rate Hike Next Week Is A Lock - Right?

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


An interest rate increase at next week’s Federal Reserve meeting would seem to be a foregone conclusion. The Fed would look downright foolish if it didn’t raise rates. But can we take anything for granted when it comes to the Fed making rate decisions?

On the surface, you would have to guess that there is almost no chance the Fed will leave rates alone at next week’s meeting. Indeed, that’s what the bond market and the federal fund's futures market are saying.

The three-month Treasury bill is currently trading at 0.50%. That’s nearly triple the 0.17% it was trading at on September 20, which was also its lowest point this year. It’s also more than double the high end of the Fed’s current fed funds range of 0% to 0.25%. Given that comparison, the Fed would look seriously out of touch with reality if it didn’t raise rates at least 25 basis points this time around. If anything, the Fed is now playing catch-up, not leading the markets. In any event, rates are going up regardless of what the Fed does or doesn’t do. Continue reading "A Fed Rate Hike Next Week Is A Lock - Right?" →

The Screws Tighten On The Fed As The Fed Readies To Tighten

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


If we can believe Janet Yellen – or rather those who believe in what they think she means – then the Federal Reserve is going to raise interest rates at its next monetary policy meeting in December. This is perhaps an appropriate time for it to do so, as it looks like the Fed is about to enter a new era. Pressure is growing on the central bank to reform itself and the way it does business, including making monetary policy.

Once again, the Fed has shown itself to be following rather than leading the market. Last week, in congressional testimony, Yellen said the Fed may raise interest rates “relatively soon,” which most people expect means at its December 13-14 meeting. This in the wake of the recent 60 basis point surge in long-term interest rates since Donald Trump was elected president. The yield on the Treasury’s benchmark 10-year note is up 100 bps since July 8, during which time the Fed has kept rates unchanged.

Yellen told the Joint Economic Committee that “the economy has made further progress this year” toward the Fed’s employment and inflation goals. And indeed recent economic reports have borne that out, including those released last week: Continue reading "The Screws Tighten On The Fed As The Fed Readies To Tighten" →

Top Five Reasons Why the Fed Won't Raise Rates This Month

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


Eric Rosengren, the president of the Federal Reserve Bank of Boston, singlehandedly spooked the financial markets last Friday when he commented that “a reasonable case can be made” for the Fed to start raising interest rates soon, which traders and investors interpreted to mean as early as next week’s FOMC monetary policy meeting.

“If we want to ensure that we remain at full employment, gradual tightening is likely to be appropriate,” Rosengren said. “A failure to continue on the path of gradual removal of accommodation could shorten, rather than lengthen, the duration of this recovery.”

While I certainly don’t have any issue with what Rosengren said – I think the Fed should have started raising rates two years ago – I’m a little puzzled what exactly he said that put the markets to flight. He didn’t seem to say anything that other Fed officials, including Janet Yellen, hadn’t also said periodically recently, plus he didn’t offer any imminent schedule for raising rates. Yet that was apparently enough to get stock and bond traders to bail. Continue reading "Top Five Reasons Why the Fed Won't Raise Rates This Month" →

Same Old, Same Old From The Fed

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


If we’re to believe the financial press, there is at least a 50-50 chance the Federal Reserve will raise interest rates at its next meeting on September 20-21. I’ll believe it when it actually happens – but not a minute before then.

The Wall Street Journal story on the release of the minutes of the Fed’s July 26-27 meeting last week, written by its senior Fed watcher Jon Hilsenrath, said the Fed announcement “suggested a rate increase is a possibility as early as September, but that the Fed won’t commit to moving until a stronger consensus can be reached about the outlook for growth, hiring and inflation.”

But haven’t we heard that before? All the Fed did was provide more of the same “let’s wait and see what happens before we do anything” prevarications.

“Members generally agreed that, before taking another step in removing monetary accommodation, it was prudent to accumulate more data in order to gauge the underlying momentum in the labor market and economic activity,” the Fed minutes actually said. “Members judged it appropriate to continue to leave their policy options open and maintain the flexibility to adjust the stance of policy based on incoming information.”

Sound familiar? Continue reading "Same Old, Same Old From The Fed" →

The Bond Market Gets Curiouser and Curioser

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


Sometimes the smartest thing is to do nothing.

This column has been pretty harsh on the Federal Reserve for its failure to start tightening monetary policy, as it sort of promised it would back in December. Since then, there’s been a steady stream of “yes we will, no we won’t” pronouncements from the Fed – both from the Fed itself and its individual members – that have left investors confused about the direction of U.S. monetary policy. Now, nine months later, the Fed has still not made the next move in “normalizing” interest rates.

A Reuters survey released last week found that 69 of 95 – that’s nearly three out of four – economists don’t expect the Fed to raise rates until December, after the presidential election, followed by two more hikes next year. We’ll see. Continue reading "The Bond Market Gets Curiouser and Curioser" →