As amazing as it may seem, a recent polls says 75% of economists expect a rate hike in June.
Before you break out laughing, that headline is from April 7, not today.
However, that story seemed nearly as absurd then as it does now.
So commence with the laughing.
Flashback April 7, 2016: The Wall Street Journal reports WSJ Survey: Most Economists Expect Next Fed Rate Increase in June.
Nearly 75% of business and academic economists polled by The Wall Street Journal in recent days said the Fed would next raise its benchmark federal-funds rate at its June 14-15 policy meeting, down slightly from 76% in the Journal’s March survey.
Forecasters assigned minimal chances to the Fed acting at its policy meeting in less than three weeks’ time. Just one economist in the survey predicted Fed officials would lift rates at the April 26-27 meeting, compared with four in the March survey. The Journal surveyed 69 economists Friday through Tuesday, though not every respondent answered every question.
Just one economist — Bricklin Dwyer of BNP Paribas — said officials would wait until after 2017 to raise rates, while Vanderbilt University professor J. Dewey Daane said he wasn’t expecting another rate increase.
June Hike Probability
Congratulations Due
I commend Bricklin Dwyer and Vanderbilt University professor J. Dewey Daane for having ability to reason instead of parroting wishful thinking by Fed officials who have not made a correct economic forecast for something like forever.
Related Reports
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- Personal Spending Weak Despite Solid Wage Gains, Autos Disappoint Again, Services Shockingly Weak
- First Quarter GDP Likely Overstated (And Don’t Expect a Huge 2nd Quarter Bounce)
It is “possible” for the economy to improve enough between now and June for the Fed to hike rates.
The safer bet is to bet against what 75% of economists think will happen a few months from now.
Mike “Mish” Shedlock
It seems the problem with the central bank is the uncertainty it introduces into investment decisions since there doesn’t appear to be rational basis for the rates set. A better way would be an arbitrary published formula establishing interest rates. Like take the last digit of the year and multiply by 2 for interest. Rates would regularly increase to 18% then fall to 0%. An investment would have 10 years to prove itself before weakly managed operations would go bankrupt at the high interest rates and change management.
My way couldn’t be any worse then the Fed just doing whatever they feel like.
Do a zig-zag between rate increases and QEs to move forward from Stagflation Lite to Big Hairy Monster Stagflation.
The poll I would like to see is how many of the 75% believe the Fed’s blather, versus how many of the 75% think the economy is too weak to raise rates but that the Fed is bonkers enough to raise anyway.
Mish, you and I thought the Fed bonkers to raise rates in December, but it was not an imprudent bet to put money on the Fed raising rates.
Are the 75% all zombie economists following the Fed like a plate of brains? Or are some of them jaded realists who are willing to bet against reason because it is a good bet with the Fed?
Sadly, one can no longer tell.
Come see me sometime at maddogslair.com.
Mark Sherman
Ben Bernanke said rates would not normalize in his lifetime . Of course he also said subprime was contained. Hopefully he will have a short life.
He’s just looking at Japan, which is the model the West is following. In fact, the West is much more dependent on perpetually low and decreasing rates than Japan was/is.
Once all net “economic growth” comes from nothing more than increasing debt, it doesn’t take long before every penny almost anyone thinks he owns, is just a chimera that will disappear the moment debt growth slows. Normalized rates (5-10% ten years) right now, would immediately make every cheesy McMansion and city Condo waaay underwater and foreclosed on. All “equity” gone. Ditto for every stock portfolio the drones have been told is important to poor their money into.
But that’s just the immediate effect. Absent the pretense that there is growth, even the guys who get to pick up a “Million Dollar” McMansion for $20K, will not be able to maintain it. Since an ugly side effect of everyone thinking they are 5 times richer than they are, is that the stuff they have built, have been built under the assumption that they can forever afford to employ an army of “Mexicans” to keep their shoddily built facade of oversized overcomplexity running forever. Which they can’t.
Formally, the chimera of ‘wealth” that the debt runup has created, and the expectation that this is “normal”, has caused America to be built in a way that depreciates faster than there is growth available for maintenance. So the country will continuously get poorer and poorer, as all the cheese and baggage deteriorate and decay.
The dimbulbs trained to “believe in statistics”, can always adjust the statistics to hid this, but Mickey Mouse “statistics” can’t hide mold growth, busted heaters, leaky windows and no money to buy heating fuel. Potholed roads, cracking bridges. The neighbors in your Condo building prostituting their teen daughters to make ends meet. Then invading your condo to take what’s there etc. While the cops are disillusioned, since their “pensions” are disappearing, there is no money to pay them, and their only competitive advantage in the brave new economy is, they have a gun and you don’t.
Argentina went through this in 2001, and was prior to that, an economy much closer to current day America, than Japan was in 1990. Meaning, “everyone” in Argentina was “wealthy” and beautiful, but noone produced anything. Instead relying on commissions made from selling goods produced by others, to those who “made money” of “asset appreciation” and “smart investments.”
Remind me again, why is it we listen to economists?
massive printing in june,i’ll take that bid,2nd qtr will be in full blown depression right before the general combine with collapsing tax receipts and soaring deficits,only option on the table is massive money printing
“All the world’s a stage.”
The Central Planning Politburo (aka Central Bank, the FED) has a different set of marching orders, politically driven not numbers driven. Economists, busy with their models, seem not to take account of this. The economy and associated numbers are just pretense, noise to keep us entertained and divert our attention. Rate hike babble from economists is just part of a false melodrama elevating central bankers/planners in status as actors (saviors of the economy) on the world stage.
The bankers themselves are smarter than the economists. I talked to a bankster on Friday about interest rate hikes by the FED. The answer: “After the election.” No hesitation. Bankers understand how the real world works, that politics trumps all. Anybody who seriously believes that the Central Planning Politburo (e.g. central bank) owes its loyalty to an abstraction called the economy should do some serious rethinking of their personal model of how the world works. FED manipulations in the 21st Century have been and continue to be politically driven, from TARP to today for certain. Economists get it wrong because they are playing with abstract models based on economic variables that are secondary to the political variables missing from the economic models. The economists could use a little Secret Sauce, if Mr. Silver has any leftover to recycle.
If the $$$ stays weak like this over the next 25 trading days, the Fed raises. It has the room to do it. THEN I do not know what hits the fan!