Wednesday, September 16, 2015

I Will Be Surprised If the Fed Doesn't Raise Rates Tommorow

I write in today's EPJ Daily Alert:
I Will Be Surprised If the Fed Doesn't Raise Rates Tomorrow
I really don't want to declare this a 100% certainty, but a rate hike by the Fed is extremely likely. This (surprise) puts me in the minority. Says Reuters
The U.S. Federal Reserve will hold fire a bit longer on its first interest rate rise in nearly a decade, according to a little over half of economists in a Reuters poll who only last week narrowly predicted the Fed will pull the trigger on Thursday. 
The survey of 80 economists based in North America and Europe was taken over the last 24 hours as each panelist was asked to reconfirm if they still held the same position, while a few who couldn't be reached last week were also polled... the number of economists predicting no change in rates [is] now outnumbering those betting on a hike by 45 to 35. Among primary dealers, 12 banks expect the Fed to hold and the remaining 10 expect a hike. 
As I have already pointed out in the ALERT, the numbers the Fed is watching most closely have all flashed rate hike.

Further, whether the Fed raises rates tomorrow, I expect multiple future rate hikes beginning in 2016. I discuss why and how to prepare for the economic climate I see ahead in the EPJ Daily Alert.



  1. I'm betting on no rate hike tomorrow. Unless they want another 2008, they had better hold rates at 0 - 0.25%. Look at an August 2015 bar chart of J.P. Morgan Chase stock. That 26% crash you see from the 19th to the 24th is just a mild warm-up if the Fed begins to wean them off the drugs. You think Janet wants this? You don't think Jamie Dimon is on the phone with her? How about the absolutely enormous housing bubble in Janet's old stomping grounds of San Francisco. You think she wants to pop that bubble? I think she'd rather hold off on the rate hikes than hike rates and have to reverse course shortly thereafter. Remember, these people will always elect to delay the crisis resulting from a boom created by credit expansion. And how do they delay the crisis? By continuing the credit expansion.

    1. then there will be a tiny rate increase and a QE 'smoothing' plan for Wall St . See, everyones happy, right?

    2. There is no chance of an announcement of a QE lite or any other kind of QE, tomorrow. ZERO.

    3. Really. How about "...the Committee will continue its policy of reinvesting proceeds from maturing Treasury securities and principal payments from agency debt and mortgage-backed securities. The Committee’s sizable holdings of longer-term securities should help maintain accommodative financial conditions..." In other words, QE lite continues.

  2. We shall see. Bubbles are bad though, so why not pop them?

  3. Bubbles are bound to pop anyway, and will pop, it is exponentially harder and harder to keep pumping them to no end, the higher they go. Because it means someone is getting priced out, and eventually it backfires and creates poverty in the end, on essential to life assets such as housing.

  4. As of Saturday, the Fed was still leaning toward a hike. The data released this week has not provided any reason to reverse that position. The bond market has already started to price in a rate hike, check out the UST 2Y, so will not be greatly affected in the short term. The equity markets will run up all day tomorrow with occasional bursts of selling, and then the announced increase in the rate and the markets will fall. No matter how much or how quickly they fall, the floor is probably about 5% down, but no more than 10% down. At that point (maybe a day or two later), BTFD will kick in.

    Of course, my little birdies could be wrong.

  5. [aka Stargazer] My guess is a .25% rate with a "QE Lite" to offset the downside. They get a twofer: their promised rate increase and a segue into further QE.

  6. I used to be a sceptic and agree with Ron Paul and Peter Schiff on this subject, but RW's solid and consistent Austrian analysis has turned me around.

    There will be debt defaults as interest rates rise, true, but the defaulters will be the small-time chumps. The biggest debtors in this game are governments and their corporatist cronies; they will always have access to the capital markets, and the markets will always churn out more and more fiat to satisfy the insatiable thirst for more debt.

    Currency inflation is the only thing since 1971 that has allowed big government to turn over its debt, adding more net-new debt to the pile all the time, with no possibility of ever paying it off. Higher interest rates will just mean more borrowing, and more currency inflation.

    What the Fed does with its own balance sheet from this point forward is almost irrelevant.

  7. Up 0.125% either now and/or in December. In other words a compromise. The gamblers will rejoice because it's lower than what was threatened and the fed can pretend to have credibility.