Sunday, October 16, 2016

Fed’s Dudley Expects a Rate Increase This Year

Federal Reserve Bank of New York President William Dudley said Friday an interest-rate increase this year is pretty likely.

“We are moving ever so slowly toward a point in time where we are going to tighten monetary policy,” Dudley said in an interview with The Wall Street Journal. “I think if the economy continues to evolve along the path we expect, I’d expect we’ll be raising interest rates relatively soon.”

He added, however, “When the economy is growing just a bit above trend, the labor market’s tightening only slowly and inflation is below your 2% objective, there’s not a lot of urgency to tighten monetary policy quickly."

“Every meeting is a live meeting,” Dudley said. But he cautioned “it’s not like if we wait a meeting or don’t wait a meeting, it has huge consequences for the trajectory of the economy.”

Dudley's comments are significant. I view him as a part of the Federal Reserve troika, that also includes Fed Chair JanetYellen and Vice-Chairman Stanley Fischer, that are the primary drivers of Fed policy.

I am not forecasting a Fed rate hike at the December FOMC monetary policy meeting but it is a very real possibility.

It's time for the Austrian-lites to once again bring out their bullhorns and deny that the Fed can raise rates at this time and that the Fed's next move will be to lower raise, possibly even go negative. All of which is absolutely absurd thinking.



  1. Trump called them out for being political now they have to raise rates to save face.

  2. Correct me if I'm wrong, but haven't they been saying a rate hike is just around the corner for several years already?

  3. Fed jawboning used to amuse me (John "5 rate hikes in 2016" Williams), now it just bores me. Trump's campaign charges against the Fed have been, interesting though. "Credibility" hangs further in the balance. Anyway, I believe it was Jimmy Joe Meeker who commented on this topic a while back along the lines that even raising a quarter point a year for a number of years constitutes rate repression. Didn't Bernanke say something like "there will be no rate normalization in my lifetime?"

  4. "I'm sure I'll take you with pleasure!" the Queen said. "Two pence a week, and jam every other day."
    Alice couldn't help laughing, as she said, "I don't want you to hire me – and I don't care for jam."
    "It's very good jam," said the Queen.
    "Well, I don't want any to-day, at any rate."
    "You couldn't have it if you did want it," the Queen said. "The rule is, jam to-morrow and jam yesterday – but never jam to-day."
    "It must come sometimes to 'jam to-day'," Alice objected.
    "No, it can't," said the Queen. "It's jam every other day: to-day isn't any other day, you know."
    "I don't understand you," said Alice. "It's dreadfully confusing!"

  5. Yep Hallow Daze, I did. There is no indication of the end of financial repression.

    In 2015 it was 'rate hikes are coming' and I predicted a .125 increase in December. It was .25 in December. This year people were predicting four significant rate hikes and now the accepted prediction is another trivial single 0.25 hike in December. I may even be on record here predicting a single .25 hike at the end of the year.

    At this rate it will take roughly a couple decades before rates reach historical norms. (just to get to five percent it will take another 18 years, 20 years from 2015) It will be years before they even reach ridiculously low. Bernanke did say that and he's probably right.

    The punishment of savers is relentless, determined, and intentional.