Tag: The Federal Reserve

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" →

Coming Soon: Uncle Sam's Credit Cards

Posted on by George Yacik

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


If you were in the market for a new credit card or needed a loan to buy a car, would you think to go to some federal agency to get one?

Not right now, maybe, but we seem to be headed in that direction—and very quickly, too.

And the idea isn’t all that far-fetched when you come to think of it. The federal government is already heavily involved in consumer lending, either directly or indirectly. It’s the biggest player by far in the two biggest consumer loan businesses. Getting into new areas like credit cards and auto loans isn’t a terribly big leap.

It’s fairly safe to say that the residential mortgage market would barely exist were it not for the government-sponsored enterprises like Fannie Mae and Freddie Mac, plus other government agencies like the FHA, VA, and USDA. While these agencies don’t make loans themselves, they buy them from private lenders, stamping a federal guarantee on them in the process. Before the global financial crisis, there was a thriving market for private mortgages through a private secondary market, but since then that market has largely ceased to exist, except for a smattering of securities backed by jumbo loans, those too large for the federal agencies to buy. That leaves the government with about a 90% or more market share. Prior to the financial crisis, the government still commanded a market share of about 50%. Continue reading "Coming Soon: Uncle Sam's Credit Cards" →

Stocks Tumble On Fear Of Interest Rate Hike

Posted on by The INO.com Team

Hello MarketClub members everywhere. Stocks are trading sharply lower today after comments from a Federal Reserve banker suggests that a September rate hike might not be entirely off the table after all.

MarketClub's Mid-day Market Report

In a speech today Federal Reserve Bank of Boston President Eric Rosengren said that "a reasonable case can be made" for a rate hike, according to The Wall Street Journal.

Those words shook Wall Street, as traders had pretty much written off an interest rate increase at the Fed's Sept. 20-21 meeting. This feeling was based on the weaker-than-expected August jobs report released last week. Although Rosengren did not specifically mention September, his words, to some degree, leaves the door open to a rate hike, which Wall Street is not positioned for according to analysts.

Key levels to watch next week: Continue reading "Stocks Tumble On Fear Of Interest Rate Hike" →

Fed Tightening Will Unleash U.S. Growth

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


The Federal Reserve, the only central bank in the G7 economies and China to raise rates and the only central bank to lead a tightening cycle, is also the only central bank to get it right. As counter-intuitive as that may sound, higher rates in a world of negative rates and massive monetization is the only viable solution to stimulate growth. To understand the irony, we must delve into credit markets and assess what’s broken.

Cheap Credit Expensive Growth

One of the arguments espoused by critics of monetary stimulus, whether it’s negative interest rates or quantitative easing, is inflation. But in reality the real cost of a ultra-loose monetary policy is the exact opposite—deflation; prices in most of the world and, in fact, in most products are either falling or stagnating. The reason is that when the policy is ultra-loose inefficient sectors of the economy are kept artificially afloat. As long as interest rates are close to zero failing sectors can keep on piling debt and thus contribute less and less to growth while leaving less available capital to the more efficient sectors that really need to grow. Continue reading "Fed Tightening Will Unleash U.S. Growth" →

Why The Convoluted Message From Yellen?

Posted on by The INO.com Team

By: Gary Tanashian of Biiwii.com

Why the tough talk out of one side of her mouth and ‘other policy tools’ language out of the other (ref. Yellen Lays Out Tools… )?  Oh, I don’t know.  Maybe it has something to do with this…

The stock market has merrily followed money supply aggregates upward since 2009.  When money supply decelerates the market corrects.  When money supply ramps upward the market ramps upward.  Money supply has been rolling over since 2014, which was not coincidentally when the first tremors began for the stock market in its recently completed top (that wasn’t).  From SlopeCharts…

s&p 500 and monetary base

But something is out of whack here.  Let’s dial in for a closer look. Continue reading "Why The Convoluted Message From Yellen?" →