Saturday, August 6, 2016

Top Analyst Warns on Bond Market

Mohamed El-Erian, chief economic adviser at Allianz, told Bloomberg News on Friday that bond traders underestimate the likelihood that the Federal Reserve will raise interest rates in September after a surge in U.S. hiring bolstered the case for tighter monetary policy.

He has a point.

The Fed is very short-term data driven when it comes to monetary policy and the jobs numbers that they look at are currently very strong. A September rate hike is certainly in play, though, a stock market dip or new numbers out between now and the September 20-21 FOMC policy meeting could somehow spook the Fed and delay a hike.

That said the possibility the Fed is going to cut rates in September is near zero, Remarkably, though, I still see some Austrian-lites claim that the Fed is stuck and will have to cut rates soon. Not going to happen.


1 comment:

  1. Robert, As I understand, Austrian theory does not predict the decisions of the money printers, it only predicts what happens when they do print money (bubbles, etc). Therefore, I don't think your beef with the "Austrian-Lites" has much to do with I missing something here?

    Also, I think the Fed will tend to aid in financing the massive debt bubble (and they fear making any drastic moves), so if there are any rate hikes, they will be relatively negligible.