Tag: The Federal Reserve

Jobs Report Not Enough to Signal September Liftoff

Posted on by George Yacik

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


Was May's better-than-expected jobs report strong enough to convince the Federal Reserve to start interest rate liftoff in September?

Based on the market's reaction on Friday, the answer sure looks like yes. Yields on long-term U.S. Treasury bonds spiked to their highest levels since last October, and stocks were mostly lower.

But let's not carried away with one number and one report. Certainly the data-paralyzed Fed won't. If we get three solid months of positive economic statistics, then I’ll think there's a chance – albeit a slim one – the Fed will make a move in September. Until then, we'll have to wait and see.

Notice I've already written off next week's Fed meeting as the first interest rate increase. While the minutes of the Fed's April 28-29 monetary policy meeting "did not rule out" the possibility of raising rates at the June meeting, it was "unlikely" that economic data would justify doing so by then. Nothing's happened in the meantime to change that. Continue reading "Jobs Report Not Enough to Signal September Liftoff" →

The Waiting Is The Hardest Part

Posted on by George Yacik

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


Surprise, surprise. The Fed isn't going to raise rates in June after all.

While the just-released minutes of the Fed's April 28-29 monetary policy meeting revealed the central bank "did not rule" out the possibility of raising rates at its June 16-17 meeting, "many participants thought it unlikely that the data available would provide sufficient confirmation that the conditions for raising the target range for the federal funds rate had been satisfied."

In other words, economic reports over the past several months haven't come close to giving the Fed comfort to start normalizing monetary policy – i.e., raising rates – without jeopardizing growth, or what little there has been recently.

In the first quarter, U.S. GDP rose only 0.2%, down from the 2.2% growth rate in the fourth quarter of 2014. But economists are now expecting that figure to be revised downward next Friday, possibly to show negative growth. Continue reading "The Waiting Is The Hardest Part" →

Yellen's Gaffe

Posted on by George Yacik

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


Is Janet Yellen suddenly signaling an imminent rise in U.S. interest rates?

At a conference in Washington Wednesday sponsored by the Institute for New Economic Thinking, in an answer to a question from co-panelist Christine Lagarde, Yellen said:

"I would highlight that equity-market valuations at this point generally are quite high. Now, they're not so high when you compare the returns on equities to the returns on safe assets like bonds, which are also very low, but there are potential dangers there."

The Federal Reserve chair also had something to say about interest rates. "We could see a sharp jump in long-term rates" after the Fed starts to normalize – i.e., raise – interest rates, she said.

Her words had the desired effect, if indeed that was her desire. Stock prices dropped around the globe, as did bond prices, driving yields sharply higher. The yield on the 10-year German government bund jumped as high as 0.78%, its highest level in more than five months and up from just 0.08% only three weeks ago. The yield on the 10-year U.S. Treasury note rose above 2.20%, its highest level in two months and up more than 35 basis points in the past month. Continue reading "Yellen's Gaffe" →

There Is Not Much Difference Between The Fed And Greece

Posted on by The INO.com Team

Hello everyone and happy Cinco de Mayo.

Let's start with Greece. It is an ongoing disaster that nobody wants to face, especially the bankers who may have to take a 50% haircut on their loans, that's if they're lucky. I think it was Citibank's former chairman, Walter Wriston, that said, "Countries don't go bankrupt." Welcome to the real world Walter. Greece is going to default or there is going to be a revolution in the country.

That leads us to the Federal Reserve. I'm not sure they fully understand and know what they're doing. I think this grand experiment of quantitative easing has gotten way out of hand. In hindsight, it looks like the Fed got the country into something that we didn't have a plan to get out of. The answer to this conundrum was always down the line and some time in the future. The Fed has had over six years to figure this out and there is still no plan to get out of it. "More data" is another way for the Fed to say, "we don’t know!" Ben Bernanke is gone and now has a new job with a hedge fund and Janet Yellen, the new Fed chairwoman, is another disciple from the same school of thought that Ben came from. So, what do you think? Do you think the Fed has any idea what it's doing? Continue reading "There Is Not Much Difference Between The Fed And Greece" →

Fed Has Plenty of Excuses Not To Do Anything Soon

Posted on by George Yacik

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


If you're among the vanishing minority of people who still think the Federal Reserve is going to start raising interest rates in June, the latest reports on the U.S. economy and events in Europe and China should disabuse you of that farfetched notion.

The proportion of economists predicting the Fed will wait until September to raise rates rose to 70% in an April 3-9 survey, more than double the figure from the previous month. That ratio has likely gotten even wider following the news of the past week, although I think it will be well after September before the Fed starts "normalizing" monetary policy.

Let's look at the U.S. economy first, where indicators continue to come in soft. Continue reading "Fed Has Plenty of Excuses Not To Do Anything Soon" →