Feds expected to push forward with interest rate hikes

Mar 2012
55,673
37,130
New Hampshire
#1
The Fed is expected to raise interest rates by a quarter point Wednesday and indicate it plans to keep hiking them in what many expect to be a hawkish message for markets.

Wall Street economists expect the Fed to make a number of changes that reinforces a hawkish tone, including raising its growth forecasts, sounding more confident about the outlook and dropping language that says its policy is accommodative. "I think there's one very key thing we have to watch, … which is they increase their long-term growth forecast. Currently it's 1.8 percent," said Jim Caron, portfolio manager at Morgan Stanley Investment Management. "If they take it up to 1.9 percent, that's a pretty important signal."

He said the Fed will "sound more confident in the outlook, more confident to keep going the way they have been going, and I think the market will probably not be sorry it's pricing in ongoing rate increases from the Fed." The market is now pricing in two hikes for next year, nearly double what it was expecting just several weeks ago. "It's just a fact the data in the U.S. continues to be strong. Some of the worst fears over trade were not realized," he said.

Fed expected to raise interest rates and signal more hikes are coming
 
Sep 2017
5,469
6,530
Massachusetts
#2
The Fed is expected to raise interest rates by a quarter point Wednesday and indicate it plans to keep hiking them in what many expect to be a hawkish message for markets.

Wall Street economists expect the Fed to make a number of changes that reinforces a hawkish tone, including raising its growth forecasts, sounding more confident about the outlook and dropping language that says its policy is accommodative. "I think there's one very key thing we have to watch, … which is they increase their long-term growth forecast. Currently it's 1.8 percent," said Jim Caron, portfolio manager at Morgan Stanley Investment Management. "If they take it up to 1.9 percent, that's a pretty important signal."

He said the Fed will "sound more confident in the outlook, more confident to keep going the way they have been going, and I think the market will probably not be sorry it's pricing in ongoing rate increases from the Fed." The market is now pricing in two hikes for next year, nearly double what it was expecting just several weeks ago. "It's just a fact the data in the U.S. continues to be strong. Some of the worst fears over trade were not realized," he said.

Fed expected to raise interest rates and signal more hikes are coming
From a partisan perspective, I should want the Fed to hike rates quickly, since it'll throttle the economy, and I think we need a recession soon to keep Trump from being a two-term president. However, taking partisan politics out of the picture, I think they should hold off until inflation is higher. I think the Fed target for inflation is too low, especially when we're so close to the zero lower bound for interest rates. Since there's so little room to cut rates for stimulus, if we get a recession, I think we'd be better off with higher inflation, to allow for negative real interest rates, for stimulus. I also think a bit more inflation would be a good thing for fighting wealth inequality (since higher inflation will tend to reduce the real debt of people with fixed-rate loans, like lots of student-loan holders). And it will make our soaring national debt more manageable.
 
Mar 2012
55,673
37,130
New Hampshire
#3
From a partisan perspective, I should want the Fed to hike rates quickly, since it'll throttle the economy, and I think we need a recession soon to keep Trump from being a two-term president. However, taking partisan politics out of the picture, I think they should hold off until inflation is higher. I think the Fed target for inflation is too low, especially when we're so close to the zero lower bound for interest rates. Since there's so little room to cut rates for stimulus, if we get a recession, I think we'd be better off with higher inflation, to allow for negative real interest rates, for stimulus. I also think a bit more inflation would be a good thing for fighting wealth inequality (since higher inflation will tend to reduce the real debt of people with fixed-rate loans, like lots of student-loan holders). And it will make our soaring national debt more manageable.
It looks like they are certain this economy will last quite a while that its possible we get at least 2 hikes this year and likely more next year. I was a bit shocked to hear them say the trade wars mean nothing and arent touching the economy at all. Fed Chair said last month he now doesnt see a recession until late 2020 or 2021.
 
Sep 2017
5,469
6,530
Massachusetts
#4
It looks like they are certain this economy will last quite a while
I'm not sure how much that means, given their track record. Last time around, they laid off the rate hikes fairly long before the recession (the last hike was a little less than a year and a half before the recession started in December 2007). But they were hiking rates just ten months ahead of the March 2001 start of the prior recession. So, their track record of anticipating recessions isn't good.
 
Mar 2012
55,673
37,130
New Hampshire
#5
I'm not sure how much that means, given their track record. Last time around, they laid off the rate hikes fairly long before the recession (the last hike was a little less than a year and a half before the recession started in December 2007). But they were hiking rates just ten months ahead of the March 2001 start of the prior recession. So, their track record of anticipating recessions isn't good.
Agree. They tend to be US centered and dont pay as much attention to world events. Although it does become a self fulfilling prophecy. If US companies believe we wont see a recession for years, they will buy more and hire more pushing up the economy. The recession of 2008 was a worldwide event not a US event.
 
Jan 2012
811
261
SoCal
#6
Fed rate hikes are the true signal the economy is doing better. The economy shouldn't tank from such hikes. The economy tanks when malinvestments explode and cause problems.

There is plenty of inflation in the economy right now. The fed doesn't measure it because it doesn't want to measure it. We are still spending like mad no matter who is president. There isn't an easy fix. We would need to get prime borrowing back up to 6-7% to have any real signs of health and to promote savings over speculation.
 
Sep 2017
5,469
6,530
Massachusetts
#7
Fed rate hikes are the true signal the economy is doing better. The economy shouldn't tank from such hikes. The economy tanks when malinvestments explode and cause problems.

There is plenty of inflation in the economy right now. The fed doesn't measure it because it doesn't want to measure it. We are still spending like mad no matter who is president. There isn't an easy fix. We would need to get prime borrowing back up to 6-7% to have any real signs of health and to promote savings over speculation.
Currently, there are growing malinvestments associated with tariffs-- investments that only make sense in anticipation of economically inefficient protectionism for politically well-positioned industries. The Fed doesn't seem to be terribly worried about those malinvestments. We'll see if they're right to dismiss them, or whether they're missing a looming problem the way they've tended to in recent cycles.

As for inflation, it's still historically lower than normal as measured by all the usual measures (e.g., CPI-U). No doubt there are some more obscure calculations showing higher inflation, but that's always been true and always will be. The point is that right now we have room to let inflation grow quite a bit before we're anywhere near the point where it caused problems in the past.

Anyway, I'm not seeing the virtue of having prime borrowing at 6-7%.
 
Mar 2012
55,673
37,130
New Hampshire
#8
The Federal Reserve hiked its benchmark interest rate a quarter point Wednesday, upped its anticipation for economic growth this year and next, and provided a road map of what lies ahead through 2021. Along with the rate increase, the FOMC continued to project one more hike before the end of the year and three in 2019. Along with the move, committee members showed a more optimistic view of the U.S. economy. "The Fed is looking at an economy that in 2021 is slowing, and this is the first time they've said that," said Mark Cabana, head of U.S. short rate strategy at Bank of America Merrill Lynch.

Fed hikes interest rates, raises its economic outlook and drops 'accommodative' language