The market is openly mocking Patrick Harker, president and chief executive officer of the Federal Reserve Bank of Philadelphia.
Harker dismisses Brexit as a worry (In general so do I, but politicians can go crazy, so the outcome is uncertain as they say).
That said, I agree with the market view on hikes vs. that of Harker.
The Wall Street Journal reports Fed’s Harker Dismisses Brexit, Suggests Two More Rate Hikes This Year.
Federal Reserve Bank of Philadelphia President Patrick Harker shrugged off the threat to the U.S. economy posed by the Brexit vote and indicated the U.S. central bank may have two more rate rises ahead of it this year.
“Brexit is low on my list of risks, and I do not anticipate more than a transitory couple of 10ths of a percentage point slowdown in growth” to by caused by that event, Harker said in the text of a speech to be delivered in Philadelphia.
The official said he projects the U.S. economy will continue to grow, adding that in this environment, the Fed remains on track to boost further the cost of borrowing, although he didn’t say when he expects those increases to happen. “I anticipate that it may be appropriate for up to two additional rate hikes this year,” with the funds rate target rate approaching 3% by the end of 2018, he said.
Patrick Harker
Market Laughs at Harker
Trial Balloons
Going all the way out to the June 2017 meeting, the market expects no hikes.
As I have stated on numerous occasions, the Yellen Fed is desperate to hike. The Fed wants to hike now so the have “ammunition” to cut when the next recession hits.
That is the way their minds works. They are all trained in the same way.
Thus, one has to wonder if this is a trial balloon of some sort hoping to get the market expectation of hikes back up.
However, it’s highly likely that Harker is speaking his mind and is simply clueless about the state of the economy.
Mike “Mish” Shedlock
“The official said he projects the U.S. economy will continue to grow…”
translation: The stock bubble will continue to grow.
The FED doesn’t need to announce rate hikes. Brexit showed a flight to US bonds from Europe. The FED should be jumping for joy at the opportunity to unload its portfolio. When rates finally bottom and start a long term increase, the FED won’t become insolvent.
(1) It is absurd to talk about what “the market” thinks when prices are essentially set by FOMC activity.
(2) I have to laugh at anyone who thinks pensions are money good, or that life insurance companies are solvent — unless interest rates get normalized.
ZIRP forever is simply not a plausible outcome — unless you cancel the entire concept of retirement.
I haven’t heard the “Mish plan to cancel retirement for all Americans”, but I’ll call it dead on arrival without even looking at it. I think the laughing you hear is members of Congress laughing at your idea.
(3) While I agree the economy is in bad shape, the notion that lower rates is going to fix anything is just insane. There is no polite way to say it.
Zero/negative rates are also killing the banks, so if you are a Goldman Sachs conspiracy nut — Goldman needs normalized rates to keep their trading floor open.
“ZIRP forever is simply not a plausible outcome — unless you cancel the entire concept of retirement.”
Well, apparently ‘the plan” is for everyone to be able to “get rich” and retire comfortably on their stock market “investments” – kept in a perpetual bubble by our good friends at The Fed.
As Tuco said, “If you want to shoot, shoot! Don’t talk!”
Mish,
I really failed to see the plan since 2009 but I think I understand the game now.
The FED and GOV will continue to inflate the US debt away through housing, food, health care, education and taxes. The stock market will continue to defy logic because its driven by digital fiat not earnings. They will continue to do this on the backs of savers. All this rate hike talk is purely for show.
Perhaps gold is the best choice here
I would take these words seriously and not some goal seeking pollster datum
Critical thinking skills mean “just because A does indeed mean B” meaning of we have another gasoline price War imminent (50 cents a gallon in Michigan last summer) then obviously someone is on the hook for potentially trillions in bad debts. “Well we”ll just bail them out” isn’t as simple as it sounds when California suddenly needs to come to market with a 250 billion debt offering for public transportation. In other words the “gambling parlor” might force the Fed to continue to normalize as there are more important markets than equities.
The most important market is of course the recovery as a whole…and if the US economy is suddenly confronted with failing airlines, failing Banks, failing Cities yet food and fuel for the literal “Ten Cent” then No Amount of Money Printing™ will solve this.
In fact in order to defend the value of the debt markets in theory the Fed might be forced to restore convertibility of the Bucky to a hard asset…and it won’t be gold that much I can guarantee.
If convertibilitt at 50 bucky’s an ounce of silver is Assumed then I fail to see how 4% on a three month t-Bill can be ruled out.
Then folks will start to realize just what being the Global Reserve in fact means.
This FDR’a will be real silver and will buy you a House…let alone a thousand gallons of petrol.
Same blather from Fed officials for years. Nothing much changes. Historically low rates will continue while retail IRA and 401k funds will continue to pour into the market.
Are the German and French currency collapses of 1922 and 1791 of no educational value regarding our current dollar forecasting? Yes, those collapses were local, i.e. restricted to one currency and one nation, while what we are seeing today is a dollar that has now achieved a world-wide use, by banks and institutions of all nations……. But the exponential rise in the amount of created dollars we are now witnessing must entail the currency’s ultimate collapse it seems to me…. or am I missing something? Any thoughts?
It’s different this time.
We have Harvard, MIT and Princeton trained PhD’s making sure that the money-printing is done “scientifically”.
LOL….
It would be nice to have interest rates a bit closer to normal.
When this fool opens his mouth why doesn’t the audience immediately start laughing and booing and heckling him? These morons are not entitled to any respect. In fact there should be a lynch mob appearing whenever one of them shows up in public.