Tuesday, May 12, 2015

New York Federal Reserve President Backs Wenzel Analysis

On Sunday in my post, Will the Federal Reserve Ever Raise Interest Rates?, I wrote:
The Fed's troika, of Federal Reserve Chair Janet Yellen, Vice-Chair Stanley Fischer and New York Federal Reserve President William Dudley, is making it very clear as to what the Fed is looking for in terms of economic numbers that will result in a rate hike.

The transparency the Fed is providing as far as what they are looking fo is simply stunning. It is probably partly the result of fears that "audit the Fed" will gain more traction.The other reason is that they want to prep markets to the rate hike before it occurs.
At a speech delivered today in Zurich, Switzerland at the Sixth High Level Conference on the International Monetary System: Monetary Policy Challenges in a Changing World, Federal Reserve Bank of New York president, William Dudley made pretty much the same point (my emphasis):
 If the improvement in the U.S. labor market continues and the FOMC is “reasonably confident” that inflation will move back to our 2 percent objective over the medium-term, then it would be appropriate to begin to normalize interest rates.  
Because the conditions necessary for liftoff are well-specified, market participants should be able to think right along with policymakers, adjusting their views about the prospects for normalization in response to the incoming data.  This implies that liftoff should not be a big surprise when it finally occurs...
The rate hike is coming, for those that don't believe this, they are simply not paying attention to, or taking seriously, the statements of the Fed troika: Fed Chair Janet Yellen, Vice-Chair Stanley Fischer and Dudley.



  1. I wonder how rate hikes figure into the Fed's emergency planning for USG default discussed in the previous post.

  2. They really pray asset values do not plunge when they raise rates. Been telegraphing a rate raise for seemingly forever. So when it comes, in their minds there will be no surprise, no reaction. Only month after month there is no raise, Everyone makes more money on leveraged asset purchases. Can't resist one more drink. So much money. Manhattan condo's 20 to 30 million, South Beach catching up with NYC. The stock market is like a beach ball in a pool, buoyant. A Bentley and a Maserati dealer open in Bergen County. I see Bentley's in line at the school pick up and Ferrari's in the showroom on Route 17. This is not Greenwich CT.

    When it really happens we will see. If assets plunge 40% they will reverse in a heartbeat.

  3. "The rate hike is coming, for those that don't believe this, they are simply not taking seriously the statements of the Fed"

    Ding, ding, ding...just so. Why *should* they be taken seriously? These statements are nothing more than political talking points. The financial cartel that is the U.S. Fed has created a credit bubble through ZIRP and NIRP. This bubble will not survive any significant increase in rates. Unless the Fed intends to implode financial system, rates will not go up, they will only go down -- and with them so goes what's left of an economy in serious decline.

  4. Meaningful rate hikes pop all the asset bubbles they've painstakingly blown over the last seven years. Avoiding rate hikes results in a dollar crisis. Pick your poison.