Posted on 07/10/2015 4:29:53 AM PDT by expat_panama
"Give me a one-handed economist!" Harry Truman once lamented. "All my economists say, on the one hand ... on the other hand ..." Though they're all economists themselves, Federal Reserve policymakers must be thinking along the same lines as they try to assess when to pull the trigger on the first interest rate hike in nearly a decade.
On the one hand, the U.S. economy is sound. Hiring is robust, housing is finally picking up, consumers are shopping more, and even manufacturing may have stabilized after a series of shocks in the winter.
On the other, fears about Greece exiting the eurozone and China's sharp stock sell-off have rattled markets for weeks now, doing enough damage that some wonder whether they could weigh on economic growth.
So which way will the central bank lean?
"The answer is a definitive 'it depends,'" wrote Steve Blitz, ITG Investment Research chief economist, in a client note Thursday.
Blitz, like many economists, still forecasts the first hike in September after reading the June Fed policy meeting's minutes, which were released Wednesday.
"The case built for the economy in the minutes was very much biased toward growth," Blitz noted, citing a reference to the holy grail of Fed economic indicators, wage growth.
"The Fed also talked themselves out of believing the official Q1 numbers for GDP were real," he wrote, adding that the 0.2% GDP contraction forced policymakers to revise their full-year forecasts down even as they left the second half unchanged.
Many analysts have noted that the central bank's economic forecasts have repeatedly been far too optimistic since the recovery began. But as the economy has gathered momentum, many policymakers have signaled a strong desire to at least get started on the rate increase process, which is likely to be extremely gradual.
(Excerpt) Read more at news.investors.com ...
Yellen: Rate Hike Still on Target for ‘15
By Dunstan Prial
·Published July 10, 2015
·FOXBusiness
Blah blah blah, they’ve been saying this every 3 months for more quarters than I can remember.
If you think there is no inflation you aren’t living in the real world.
Lots of people sure feel that way, when it comes to guessing the timing of the next fed rate hike we’re better off looking at the fact that stuff like wages, home prices, oil, etc. are all down. Yeah, taxes tuition, and health care are all up but most people need wages, oil, and housing more.
The Government has been blowing up this economy like a balloon.
--and prices and money supply follow different paths. They can go up and down together and they can go in opposite directions. Most people (including those at the Fed) say "inflation" is a general increase in prices which is why I'm not expecting a rate hike, but if you want us to change inflation to mean a growing money supply then we can say we've had that kind of inflation for several years now.
Very much so.
The Fed stopped buying last October. Did I miss the skyrocketing rates?
The Fed stopping their buying and people thinking the Fed is done buying are two very different things. I would also consider the fact that every time the “Fed” stops buying, some ridiculous buyer pops up, e.g. Belgium, some Caribbean island, etc.
A large group of people, apparently including you, missed the endless pre-taper announcements.
"We're gonna taper soon. Soon we're gonna buy fewer bonds"
Then they missed the progress of the taper.
"We reduced our purchases by $10 billion. Next month we'll reduce by another $10 billion"
The they missed the announcement last October.
"We're done. QE has ended. No more additions to the Fed balance sheet at this time"
These well informed, sophisticated investors, could, at any moment, discover the Fed stopped their buying 10 months ago and sell the Treasuries they don't own?
Maybe they'll call the brokers they don't have in order to sell the Treasury futures they never traded?
How, exactly, will their sudden realization cause rates to skyrocket?
I guess you never go to the grocery store. LOLOLOLOLOLOLOLOLOLOLOL
How, exactly, will their sudden realization cause rates to skyrocket?
The exact mechanism is the lack of sustainable demand. The unsustainable demand comes mainly from episodes of worldwide deflation creating specific demand for dollars and carry trade unwinds creating relative demand for dollars in exchange for whatever other currency was previously speculated in. The dollar demand translates into treasury demand since those are easier to obtain. Plus, as I mentioned, the there are the foreign buyers that crop up mysteriously from time to time.
Obviously it is in the Fed's owners' and supporters' interests to keep interest rates low. They don't have to do much if the rate psychology stays low. Part of the rate psychology is the Toddsters of the world telling their respective forums that low rates are market magic and have nothing to do with the Fed.
So is the idea that the people who could cause rates to soar missed all the newspaper articles about the end of QE.
Part of the rate psychology is the Toddsters of the world telling their respective forums that low rates are market magic and have nothing to do with the Fed.
Yeah, I'm sure those guys are annoying. Any instances of them saying that on FR?
Plus, as I mentioned, the there are the foreign buyers that crop up mysteriously from time to time.
Yeah, hedge funds and rich guys are scary.
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