Thursday, September 17, 2015

No Fed Rate Hike

The Federal Reserve has announced that after two days of scheduled deliberations by its monetary policy committee, the Federal Open Market Committee, that it has decided not to raise interest rates at this time.

This is a developing story, please return to this post for updates.


Here is the full statement from the Fed:
Information received since the Federal Open Market Committee met in July suggests that economic activity is expanding at a moderate pace. Household spending and business fixed investment have been increasing moderately, and the housing sector has improved further; however, net exports have been soft. The labor market continued to improve, with solid job gains and declining unemployment. On balance, labor market indicators show that underutilization of labor resources has diminished since early this year. Inflation has continued to run below the Committee's longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation moved lower; survey-based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term. Nonetheless, the Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced but is monitoring developments abroad. Inflation is anticipated to remain near its recent low level in the near term but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams. Voting against the action was Jeffrey M. Lacker, who preferred to raise the target range for the federal funds rate by 25 basis points at this meeting.


The next scheduled FOMC meetings are:

October 27-28
December 15-16


Was the Fed Decision Leaked in Advance?


  1. Peter Schiff was right.

    1. Actually Schiff was wrong on two points. He changed his mind and said there would be a 1/4 point interest hike and he is wrong about another QE.

    2. ROFL @ Anon 2:13 PM

      EPJ Edition.

      @Anon 2:19 PM,

      Schiff has been saying that the Fed might test the waters for some time.

      Twenty-five basis points isn't really a hike; They can't just commit to it.

    3. [Time stamped]
      Forget patience, QE4 is Coming
      Peter Schiff on CNBC 3/17/2015


      "But at the same time, we've had the Fed raise rates before. You know, the last time we were at this junction, we were at much higher rates, relatively.

      "Would a quarter point really do that much this time?"

      [Peter Schiff:]

      "Well, a quarter point, in and of itself, wouldn't. But it's just the trajectory that that indicates.

      "Once the Fed goes down that direction, the markets start factoring in additional quarter point rate hikes."

  2. People who could predict the unpredictable wouldn't be in the business of selling advice; they would keep it secret.

  3. Understand that the Fed will eventually have to implement more QE if it wants to keep the game going. That is the way it works, at least according to Austrian Economic Theory. Further credit expansion is needed to continually delay the crisis. I don't think some people in the Austrian theory camp appreciate how dire the economic situation is in the Western world. We are in an end game scenario right now. The decision by the Fed today to keep rates at 0 - 0.25% was a decision to keep the game going. Folks, if they had raised the Fed funds rate today the market would have been limit down after the announcement. The Fed took the red pill today and we are heading down the rabbit hole to Venezuelan style inflation. It might take us a while to get to that destination but that is the path we're on now. Remember, the whole point of keeping monetary policy loose is to *DELAY* the crisis. Read that quote by Mises over and over again until it is burned into your memory. Further credit expansion brings about the crisis *LATER* and takes the form of currency destruction. So it will always seem like everything is going to be OK and that nothing really bad is happening in the economy until it is right there upon us, thumping us in the head.

    1. Excellent comment. Probably because it mirrors my thinking. I know Robert disagrees somewhat. But I just cannot get past the fact that the Fed above all else is to accommodate govt fiscal deficits & keep the crony party going. Why stop until you have to? My guess is there will be no significant rate increase until after the 2016 elections.

    2. Dude people that have been well read in Austrian economics have been pointing out what you have since 71. But breadlines haven't formed in the last 44 years.

      Yea someday it will do something drastic. But no one knows when. Even the 08 crash didn't turn out to be catastrophic.

      In fact crashes like that can destroy all the inflation you are so worried about. Hence the boom and bust. No where did mises say every bust would be a crack up boom.

    3. Excellent point, Phathead.

      BTW, I would like to apologize for a reply I posted on the VJWard "Black Lives Matter" article. I was unaware of your intimate familiarity with Austrian Econ, and that you (probably) know exactly who William Norman Grigg (THE leading journalistic voice documenting police brutality in the USA) is. It was a racist micro-aggression based on your moniker, and I hope I didn't offend you.

      (Yes, I do believe in "micro-aggression" and that it reflects prejudices. I do not believe prejudice is, in itself, a bad thing. Unexamined prejudice is bigotry, but "rationally calculated" prejudice is part of our nature. I would be terrified in a room with 20 young black men wearing jeans and T-shirts drinking Henny, but I would barely even notice a room with 20 YBM wearing polo shirts and khakis drinking microbrews.)

    4. @Phathead

      "In fact crashes like that can destroy all the inflation you are so worried about."

      Crashes don't destroy inflation, they temporarily mask it merely because demand for goods falls even quicker than excess printed money can bid up prices. Until at the bottom of the crash when normal demand reasserts. The excess dollars are still there. Price inflation explodes. Nasty witches brew, lowered interest rates and printed money, a real 1-2 punch.

  4. I guess its time for another Peter Schiff was right video.

  5. This will end in hyperinflation. Any rate hike will only be temporary. The Fed is not afraid of inflation and thinks it can control it. There hasn't been hyperinflation yet, so they see no reason to stop what they're doing. It's like a burgler who keeps getting away with it... Why should he stop? Right up the point he gets his head blown off.

    1. Yeah, they have absolutely no appreciation of what's going on. No understanding of where the dollars they print go. They will print money heavily straight into hyperinflation in the name of stimulating employment and promoting recovery all the way. It's pathological. A phenomenon to behold. Defies all reason.

  6. Peter Schiff was right (again).
    No, he didn't change his mind. [] That link was a mischaracterization of his stance.

    This was his real position.
    He said he believed they would not raise interest rates. If they did raise them, he believed they would be forced to lower them soon after because the fake economy would start imploding again. This would make them look like bigger fools if they raised it and then were forced to lower it again right after, which would invite more critical thinking from the masses about whether anything has actually worked.

    Schiff's predictions for QE4 are not invalidated. He didn't say they would start this meeting. He predicts QE4 will happen when the next implosion starts because they have nothing left. They can't lower interest rates any more.

  7. Its always funny to hear a mainstream economist talk about the Fed and their policy making actions. They utter all sorts of nostroms and bromides such as how the fed analyses data from employment, productivity, production, the Taylor rule, into consideration before they act on interest rates This is nothing but crap.

    The Fed always talks hawkish and acts dovish- always. They take their marching orders from their Wall Street cronies. What will the Fed do? They will do what Wall Street tells them to do. They own the Fed after all.

  8. Phathead:

    There ARE breadlines!

    It's called "Food Stamps" and 47 million people are on them.

    Those (whoever you conceive of them to be) who are behind the scenes are VERY good at what they do - disguising the true extent of the crisis.

    We all, beyond a certain age, have a vestigial memory of the Movietone newsreels of the seemingly endless lines of the soup kitchens.

    They are still there - at an order of magnitude greater.

    A year ago the Food Stamp (Vision Card - whatever) data base crashed in several states. There were instant riots at various Walmarts. I know someone that witnessed such.

    Were there riots in the bread lines? I do notso recall.

    That woman ahead of you in your grocery line ... She's unnoticably (save to me and those like me) in a bread line.

    I wish to thank you for paying for YOUR groceries ... and hers!

    It's MUCH worse now.