Tag: The Federal Reserve

When Did Market Stability Become A Fed Mandate?

Posted on by George Yacik

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


According to the Federal Reserve Act, in which Congress created the Federal Reserve System back in 1913, the U.S. central bank was given the following statutory objectives for conducting monetary policy: maximum employment, stable prices and moderate long-term interest rates.

The Fed has since given itself an additional mandate: market stability. Congress didn’t grant the Fed that power, but that seems to be the Fed’s overriding concern lately. In the process, it’s succeeded in creating what some very smart people believe is the biggest bond bubble of all time, and a pretty big one in equities, too. It’s pushed more and more of the country’s wealth into the pockets of the so-called 1%. It’s also given some people a false sense of financial security that the Fed has created a floor – a guaranteed return, if you will – under which investment returns will not be allowed to fall. Continue reading "When Did Market Stability Become A Fed Mandate?" →

Wonderland

Posted on by The INO.com Team

By: Gary Tanashian of Biiwii.com

“If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn’t. And contrary wise, what is, it wouldn’t be. And what it wouldn’t be, it would. You see?” –Alice in Wonderland

Silver out performs gold as both rise with Treasury bonds, which are in turn rising with stocks, as Junk bonds hit new recovery highs while USD remains firm as inflation expectations are out of the picture. This is highly atypical, maybe even unprecedented.

Some, deeply dug into their particular disciplines and biases, might say it is dysfunctional, as this backdrop simply does not make sense using conventional methods of analysis. Why again did I name this service Notes From the Rabbit Hole?

When the S&P 500 was robo rising month after month, year after year as it did from 2011 to 2015, you did not need the market report with the funny name because all was linear and as it should be. The same actually, could be said for gold. It was linear and as it should be in its relentless downtrend. Casino patrons simply ride the trends!

But today things are making sense simply because we don’t have a need to make them make sense as linear thinkers would do; we go with the indicators and charts. Continue reading "Wonderland" →

The Gang That Couldn't Shoot Straight

Posted on by George Yacik

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


Is a July rate increase back on now because of the strong June jobs report? If not July, then September?

June’s unexpectedly strong 287,000 gain in nonfarm payrolls – more than 100,000 above Street forecasts – has some people believing that the Federal Reserve will now once again change its mind and increase interest rates sometime this summer, either later this month or at its September conclave.

But the bond market isn’t buying it, and neither am I. The yield on the benchmark 10-year Treasury note ended last Friday at a new record low of 1.36%, down eight basis points for the week. That doesn’t sound like bond investors believe that a rate increase is imminent. And it’s hard to believe that the Fed, which won’t make a move unless the sun, moon and stars are in perfect alignment, will suddenly take the big rebound in nonfarm payrolls as the green light to raise rates. It will take a lot more than that. Continue reading "The Gang That Couldn't Shoot Straight" →

Fed Might Still Raise Rates

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


Not too long ago, July was marked as THE month that the Fed would raise its benchmark rate for the second time in a year. The last time the Fed hiked rates twice in the same calendar year was a decade ago. Now, in the wake of the Brexit shocker, Bloomberg reports markets are pushing the probability of the next rate hike towards the end of 2018. Are investors overly pessimistic? Here are some factors to consider.

Brexit Impact on the US

“Kicking the can” has been a common analogy for the EU’s handling of the Greek debt crisis. In fact, until this day, from way back in 2010 when the crisis over Greece’s debt first erupted, the Greek crisis has not been resolved. Now, with EU leaders and the UK deeply divided on the timing and execution of Brexit, the UK could delay the activation of Article 50 of the Lisbon Treaty – at least until it gets an easy way out of the EU. A slow and drawn out Brexit, while negative for the UK economy in the immediate term due to uncertainty, may have only minimal impact on the US economy in the same time horizon. A slow, drawn out Brexit does not create shocks, and without the threat of an immediate shock, the US economy should weather the transition well. Continue reading "Fed Might Still Raise Rates" →

Fed To Markets: See You In 2019

Posted on by George Yacik

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


The Federal Reserve has made it pretty clear, by its actions if not by many of its pronouncements, that, like Melville’s Bartleby the Scrivener, it really would prefer not to do anything. Now it looks like it’s planning to take off not just the rest of this year but the next couple of years, too.

Instead of no rate increase this year, which is looking more and more like a done deal, we may not see higher rates until 2019 at the earliest, at least according to one Fed official.

Last week, as expected, the Fed left interest rates unchanged while lowering expectations for future rate increases, both this year and beyond. In arriving at that decision, which was unanimous, the Fed’s monetary policy committee cited recent weakness in the jobs market, previously an area of relative strength in the economy. Continue reading "Fed To Markets: See You In 2019" →