Wednesday the Federal Open Market Committee (FOMC) gave no date for an interest rate hike, leaving analysts and economists speculating as to when the long anticipated .25 percent increase in the federal funds rate, which now officially stands at “zero to .25 percent,” will come.
Following the Fed’s official statements issued after FOMC meetings has become almost comical.
The New York Times sees September as “looking likelier” for the increase. That’s because, according to the Fed’s statement, the economy continued to expand at a “moderate pace, which is driving solid jobs gains and declining unemployment.”
Ignored is that many people have quit looking for jobs and that many jobs taken are second part-time jobs to supplement other part-time jobs, hardly signs of “solid jobs gains.”
The Financial Times says the Fed “signalled that it remained on course to lift interest rates this year but left its options open on when to pull the trigger as it waits more evidence of the strength of the recovery.”
Chris Low of FTN Financial says, “But they are still waiting for more good news before they actually pull the trigger.”
Distressing the Fed is that inflation is running far below its target rate of 2 percent. Year over year through May, it registered only .2 per cent. It used to be that one of the Fed’s mandates was to contain inflation; now, one of its goal is to cause inflation.
(As discussed in “Is 2 percent inflation enough?” there are establishment economists who question the 2 percent target, asking why not 4 percent?)
The New York Times noted that investors pushed stock prices higher on the Fed’s announcement Wednesday. However, Thursday stocks failed to follow through.
I suspect that Yellen and Co. fear a major stock market decline on any rate hike announcement. I further suspect what they would like to see is rising stock prices in the weeks following FOMC statements that suggest a rate hike is coming soon. Rising stock prices would suggest that the markets had priced in a rate hike and therefore the FOMC was free to move.
If this is the case, stock prices over the next six weeks will give us a clue as to whether we’ll see a rate hike in September, or December or maybe in 2015.
The Fed is trapped – it doesn’t actually DARE raise rates, so it will just talk about raising them, but it’s trapped with its ZIRP policy. The increase in government debt just during this administration (which DOUBLED IT!) would make a small 0.25% raise in rates cost the Treasury $22.5 BILLION in higher bond rates! This is only going to get worse, so the Fed will NEVER raise rates to a reasonable level again. It has decided to sacrifice savers to benefit borrowers and the big banks, and the corruption in the SEC, congress and the White House is so endemic that NOBODY ever went to jail for the 2008 crash, despite numerous banks paying BILLIONS in fines while “Not admitting any wrongdoing.” Exactly WHY were they paying those huge fines then?
The problem is that the banks have captured their regulators, who all want to work at a TBTF bank when they leave the SEC, so there is very little oversight and NO prosecution whatsoever. The Treasury and numerous positions within it are stocked by former Goldman Sachs employees, who make sure their former employees get billions of government largess. Hundreds of bankers and brokers SHOULD have gone to jail, at least one of the TBTF banks should have gone under and the rest should have been broken up, and instead we find ourselves with even BIGGER TBTF banks with even more power and leverage today!
Honestly, I don’t see how this ends without a massive crash, the loss of faith in the dollar, and the welfare crowd marching with torches and pitchforks. Let’s just hope they head for the Fed building rather than Capitol Hill. (Although both locations would be helpful to the future of the country…)
Thank you for publishing the truth.
A person like me appreciates all the hard work you do in reporting this good information.
Regards,
Cynthia Lucas