Wednesday, September 7, 2016

Goldman Sachs Says Fed Interest Rate Increase Is Imminent

The guy that has lunch every week with New York Federal Reserve president William Dudley says that investors are in for a rude awakening in just a few weeks.

Goldman Sachs chief economist Jan Hatzius told CNBC Friday that the most likely outcome at the  two-day FOMC monetary policy meeting that concludes on September 21 is that the Federal Reserve will raise rates.

He said that Friday’s jobs report—showing the American economy created a less-than-expected 151,000 new jobs—was far more positive for the economy than many have perceived. “It was a little below expectations, but for us, it’s just enough to make it a little more likely than not that they do go in September,” Hatzius said.

Goldman now says there is a 55% chance that the Fed will raise rates in September, up from a 40% chance it had been predicting before Friday’s jobs numbers. And that prediction was raised from earlier this summer, when Hatzius was placing a 35% chance of a rate hike in September.

Based on trading in the Fed futures market, the general expectation of traders is that a rate hike at the September FOMC meeting is only 18%.

Whether the next change by the Fed comes at the September meeting or later, possibly December, expect another increase in rates. The view held by Austrian-lites that the Fed can't raise rates is based on a fundamental misunderstanding of Austrian School Business Cycle Theory.



  1. I am still waiting for those four or five real rate hikes this year. Not 0.25% stuff and not .25% every year nonsense either. Either the fed is going to end financial repression or it's not. An annual .25 increase says financial repression is going to last about two decades further.

  2. "Goldman says there is a 55% chance" sounds like a fundamental misunderstanding of probability.

    1. This is another boy crying wolf. Not to say that the Fed will never be able to raise rates, just that they will not be able to tighten significantly without bringing about the very crisis they wish to avoid much sooner than they need to. They will stay easy, or they bring down the financial system sooner than later.

      Robert, you're positioned for inflation, and so are the Austrian-lites. The only difference is that you seem to think another Paul Volcker will appear at the Fed to rein things in once the inflation becomes high enough. We disagree. This isn't the late 70's and we are not in Kansas anymore. Volcker's actions reined in the inflation and brought about a recession. Those same actions today would completely collapse the entire Western banking and financial system, as almost happened in 2008.

      So as I've said before, the Austrian-lites do not disagree with your economic theory in general. They disagree with you as to where we as a nation are on the Misesian path toward the crack up boom and the destruction of the currency system.

  3. Ahhh, my morning dose of GS propaganda. Wow, a 55% chance now = "imminent"? I wonder why Dudley would say investors would be in for a "rude awakening" if the Fed raises rates? If he understood ABCT like RW, he would be preparing investors for another "leg up" in the market in the face of and concurrent with higher rates. Sounds like he thinks markets might go down when rates go up or something. Must be another Austrian-lite.

  4. They have revised this down to a 40% probability