CDZ No Fed Interest Rate Hike: Policy or Politics?

[jwoodie]

Despite stable job growth and a 4.9% official unemployment rate, the Federal Reserve is refusing to raise interest rates until December. Is this sound economic policy, or is it an attempt to forestall any bad news about falling municipal bond values and a softening economy until after the November elections?

 

[Asclepias]

Despite stable job growth and a 4.9% official unemployment rate, the Federal Reserve is refusing to raise interest rates until December. Is this sound economic policy, or is it an attempt to forestall any bad news about falling municipal bond values and a softening economy until after the November elections?

Its just the game they play to control money. So far it has worked since they got rid of the gold standard.

 

[SassyIrishLass]

There won't be a hike until after the election...and if Trump is elected the moron Yellen will be looking for employment

 

[JakeStarkey]

Despite stable job growth and a 4.9% official unemployment rate, the Federal Reserve is refusing to raise interest rates until December. Is this sound economic policy, or is it an attempt to forestall any bad news about falling municipal bond values and a softening economy until after the November elections?

Now jwoodie has converted to the Obama team now that the economy is in good shape.

 

[jwoodie]

Despite stable job growth and a 4.9% official unemployment rate, the Federal Reserve is refusing to raise interest rates until December. Is this sound economic policy, or is it an attempt to forestall any bad news about falling municipal bond values and a softening economy until after the November elections?

Now jwoodie has converted to the Obama team now that the economy is in good shape.

I was trying to be subtle by citing the "official" unemployment rate in order to focus on the politicization of the Federal reserve. But thanks for avoiding expletives in your response.

 

[JakeStarkey]

Thank you, jwoodie. The issue is that the banks have learned to love a no interest banking system (that is, they pay no interest to their depositors). Also, low inflation enhances that position. The economy is not robust, no, but it is not softening.

 

[pinqy]

There won't be a hike until after the election...and if Trump is elected the moron Yellen will be looking for employment

How do you figure? Her term as Chairman doesn't end until February 2018.
Not all appointments begin and end with change of Presidency.

 

[waltky]

Long range interest rate forecast cut...

Fed again poised to cut longer-run interest rate forecast
Tue Sep 20, 2016 | U.S. Federal Reserve policymakers are set this week to again cut their forecasts for how high interest rates will need to go in an economy where output, productivity and inflation are growing at a slower pace than in past decades.

It would be the fourth time in 15 months that the U.S. central bank has been forced to admit its estimate of this so-called neutral rate was too optimistic, raising questions about the health of the economy in the coming years. The Fed, however, still insists low interest rates and its large balance sheet of bonds are sufficient to continue bolstering economic growth. Conversations with Fed officials suggest some will cut their predictions for the longer-run rate at this week's monetary policy meeting, with the median forecast possibly falling to 2.75 percent. It was 3.75 percent in June 2015 and 4.25 percent four years ago.

The Fed is expected to leave its benchmark overnight interest rate unchanged following its two-day meeting on Wednesday, according to a Reuters poll of economists. The Fed's policy rate has been about 0.38 percent since it was raised in December, the first increase in nearly a decade. The expected reduction in the longer-run neutral rate forecast amounts to a lower speed limit on future rate hikes, and points to fewer increases with longer gaps between them than U.S. central bankers and investors had expected. The lower the neutral rate forecast, the less anxious the Fed needs to be about tightening policy, which would justify its repeated decisions to defer rate increases.

The result, says San Francisco Fed President John Williams, will be the "shallowest" set of rate hikes ever; "much flatter," according to Dallas Fed President Robert Kaplan in a separate conversation, than anything in the past. The Fed has not raised rates this year despite signaling in December that four rate hikes were coming in 2016. That number has since been scaled back to two hikes this year, with another three hikes in 2017, due to a global growth slowdown, financial market volatility and tepid U.S. inflation.

But given the new thinking on the neutral rate, that seems overly optimistic. Fed policymakers say an aging U.S. population and decline in productivity growth is sapping economic potential, making them wary about raising rates too fast. "They are not very far from being in a tightening mode," said Shehriyar Antia, founder of Macro Insight Group and a former senior analyst at the New York Fed. "That augers for more patience since the risk of you falling behind with inflation is less because it ain't going to take that much for rates to lean on inflation."

FED TOOLBOX

 

[waltky]

Fed: Interest rates unchanged...

Fed keeps rates steady, signals one hike by end of year
Wed Sep 21, 2016 | WASHINGTON - The U.S. Federal Reserve left interest rates unchanged on Wednesday but strongly signaled it could still tighten monetary policy by the end of this year as the labor market improved further.

Fed Chair Janet Yellen, speaking after the central bank's latest policy statement, said U.S. growth was looking stronger and rate increases would be needed to keep the economy from overheating and fueling high inflation. "We judged that the case for an increase has strengthened but decided for the time being to wait," Yellen told a news conference. "The economy has a little more room to run." Yellen said she expected one rate increase this year if the job market continued to improve and major new risks did not arise. The Fed kept its target rate for overnight lending between banks in a range of 0.25 percent to 0.50 percent, where it has been since it hiked rates in December for the first time in nearly a decade.

The central bank has appeared increasingly divided over the urgency of raising rates. On Wednesday, Kansas City Fed President Esther George, Cleveland Fed President Loretta Mester and Boston Fed President Eric Rosengren dissented on the policy statement, saying they favored raising rates this week. At the same time, policymakers cut the number of rate increases they expect this year to one from two previously, according to the median projection of forecasts released with the statement. Three of the 17 policymakers said rates should remain steady for the rest of the year.

The Fed also projected a less aggressive rise in interest rates next year and in 2018, and cut its longer-run interest rate forecast to 2.9 percent from 3.0 percent. Investors did not appear to significantly shift their bets on the timing of the next rate hike. Prices for fed funds futures contracts suggested investors continued to see just better-than-even odds of a hike at the December policy meeting, and almost no chance of an increase in November.

U.S. stock prices rose after the Fed released its statement. The dissents from those wanting a hike this week suggested to some economists that pressure was building. "While the Federal Reserve held rates unchanged, the highly unusual 7-3 vote points to the depth of its policy dilemma and makes a December hike more likely," said Mohamed El-Erian, chief economic adviser at Allianz.

FOCUS ON DECEMBER

 

[jwoodie]

As usual, I am right again: Janet Yellen is already promising rate hikes in December. Why not now, hmm?

 

[waltky]

Consumer confidence starting to slide...

Drop in U.S. consumer spending clouds Fed rate hike outlook
September 30, 2016 | WASHINGTON (Reuters) - U.S. consumer spending fell in August for the first time in seven months while inflation showed signs of accelerating, mixed signals that could keep the Federal Reserve cautious about raising interest rates.

The Commerce Department said on Friday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, fell 0.1 percent last month after accounting for inflation. Analysts polled by Reuters had expected a 0.1 percent gain. "Consumers took a breather in August," said Chris Christopher of IHS Global Insight. Fed Chair Janet Yellen said last week she expected the U.S. central bank would raise rates once later this year to keep the economy from eventually overheating.

Prices for fed funds futures suggest investors see almost no chance of a hike at the Fed's next policy meeting in early November and roughly even odds of an increase at its mid-December meeting, according to CME Group. The dollar little changed against a basket of currencies while U.S. stock prices were trading higher. Consumer spending, which has been robust in recent months, partially offset the drag from weak business investment and falling inventories in the second quarter when the economy expanded at a lackluster 1.4 percent annual rate.

Shoppers ride escalators at the Beverly Center mall in Los Angeles, California​

Economists said overall economic growth could still accelerate in the current quarter even with August's slight decline in consumer spending. The Atlanta Fed said growth appeared on track to accelerate to a 2.4 percent annual rate in the third quarter, according to its closely watched GDPNow forecasting model. It had forecast growth of 2.8 percent for the period earlier this week.

A tightening labor market appears to be pushing up wages and could fuel higher levels of spending in the future. Personal income rose 0.2 percent in August, in line with expectations. Consumer prices also rose about as much expected in August, with the price index excluding food and energy increasing 0.2 percent from the prior month. That left inflation excluding food and energy at 1.7 percent in the 12 months through August, up a tenth of a percentage point from the prior month and closer to the Fed's 2 percent inflation target.

Drop in U.S. consumer spending clouds Fed rate hike outlook

 

[katsung47]

It's politics. The insiders control the economy of this country. That's why 1% people hold most wealth against the others. They manipulate financial market and currency value. The latest one is Oct. 1st. (or Sept. 30).
Something big will happen from 9/23 to 10/2. In internet, there's a pop-up warning:

Friday, September 30th, 2016:

D-DAY
FOR THE U.S DOLLAR
On Friday, September 30th...
a new kind of "world money" goes live.

Though it didn't happen, the insiders had planned a big crash in financial market.

 

[jwoodie]

Elusive 2016 Fed interest rate hike coming into focus

Will Rising Interest Rates Hurt Stocks?