Following another round of worthless non-revelations before the US Senate Banking committee, the Wall Street Journal reports Yellen Says Fed Will Consider Raising Rates at Coming Meetings.
Federal Reserve Chairwoman Janet Yellen signaled the central bank could consider raising short-term interest rates at its next policy meeting in March and sounded an optimistic note on the economy in testimony to Congress on Tuesday.
If job gains and rising inflation continue as the Fed expects, an increase in the benchmark federal-funds rate likely would be appropriate “at our upcoming meetings,” Ms. Yellen said at the presentation of her semiannual monetary policy report to the Senate Banking Committee.
Ms. Yellen’s reference to “upcoming meetings” leaves the door open for a potential rate increase at the Fed’s March 14-15 policy meeting. Central-bank officials last lifted the fed-funds rate in December to a range between 0.50% and 0.75%, and penciled in three quarter-point moves in 2017. They held the rate steady at their Jan. 31-Feb. 1 meeting. A March move isn’t widely expected. Most economists surveyed recently by The Wall Street Journal expected the next rate increase in June.
Trump Uncertainty
The Financial Times paints an equally useless picture: Yellen Warns of Economic Uncertainty Under Trump.
The US economy and fiscal policy face an uncertain path under the Donald Trump administration, Janet Yellen warned on Tuesday as she declared “monetary policy is not on a preset course” but that it would be “unwise” to raise rates too slowly.
“As I noted on previous occasions, waiting too long to remove accommodation would be unwise,” she said.
Responding to questions later she declined to say whether the next rate increase would come at the Fed’s policy meetings in March or June. “I can’t tell you which meeting it would be. I can tell you that each meeting is live,” she said, adding: “It’s our expectation that rate increases this year will be appropriate.”
Yellen also struck a note of caution about the new administration and expectations that its plans for tax cuts and infrastructure spending would lead to looser fiscal policy and more rapid growth.
“Considerable uncertainty attends the economic outlook,” she said, pointing to “possible changes in US fiscal and other policies” as one of the main sources of that.
Would there have been no uncertainty under Hillary? Is there ever no uncertainty?
Market Expectations
If the market does not expect a hike in March, the Fed will not hike. According to CME Fedwatch, Fed Fund futures imply only a 17.7% chance of a hike in March.
The next FOMC meeting date is March 15. It’s unlikely the data will be strong enough for rate hike odds to change significantly by that date.
In June, the futures imply a 70.7% chance of at least one hike.
Unless those odds change, the Fed will hike in June.
But in contrast to March where there is too little time in which data can be strong enough to hike, there is plenty of time between now and June for economic data to weaken enough where the Fed will not hike.
The meeting revealed nothing.
Mike “Mish” Shedlock
It is too early. Everyone ncluding the fed is taking a wait and see attitude on where the Trump agenda will increase gdp. This is a radical departure from the norm and no one has a clue on its ultimate impact.
Well, it would appear that the stock market is calling the Fed’s bluff here.
If the Dow is nearing 22,000 by March 14th (looking quite possible), I would expect a 25 bps increase in the FF target on March 15th.
So now Yellen (and her apologists) blame Trump for her and her predecessor’s bad decisions and incompetence for the last decade?
HA!
Now I’ve seen it all!
If the Oroville Dam collapses I suppose the Trump haters will blame him for that too!
lol.
If the Oroville Dam collapses I suppose the Trump haters will blame him for that too!
No, for that one they will blame Bush!
With China and foreign entities selling treasuries perhaps the fed is being forced to raise rates. Seems like another angle on all this…
I had this old link …
http://ticdata.treasury.gov/Publish/mfh.txt
Looking at this data, you can see the two top holders — China and Japan — have sold out about 252 billion. If you look at the grand total it decreased 181 billion. These numbers are up to Nov 2016. Perhaps we are farther down the road on this trend. So, it could take China another 3-4 years to burn through the rest.
I’d assume with all the selling then the rates would have to go up.
Makes me wonder if the selling was timed for an election year and will carry through into the next presidential cycle. This would give people a “political” motivation to assign blame they might not understand.
I guess that money has to flow somewhere. Perhaps into stocks or back to China to prop things up.
http://ticdata.treasury.gov/Publish/mfh.txt
Explained many times
China sold treasuries to prop up the Yuan and stop capital flight
– There’s no uncertainty. When I look at the chart of the 3-month T-bill rate then currently I would put my money on that the FED is going to raise interest rates at a (!!!) next FOMC meeting.
– Just look at this chart:
http://stockcharts.com/h-sc/ui?s=$IRX&p=D&b=5&g=0&id=0
Next?
– That one chart will tell me WHEN the FED will raise or lower the Fed’s Fund Rate (FFR). That rate has now risen above and stayed above the 0.50% mark. If that rate approaches and goes above 0.75% in say May of 2017 then I will put my money on a rate hike in May 2017. But it also could happen before the next FOMC meeting. In that regard it’s (like Yellen has said many times) “Data dependent”.
– If that rate falls down to say 0.5% decisively then I put my money on the FFR going down to 0.25% (“Data dependent” remember ??).
– My personal assumption is that in the next financial crisis a person called Mr. Market will force the FED to lower the FFR to go down again down to under 0.25%.
– I won’t make predictions, I just follow the chart with the 3-month T-bill rate and change my opinion accordingly.
– Both Robert Prechter & Bob Hoye are convinced that the FED follows Mr. Market.
I’ve read Prechter’s analysis supporting the theory the FED follows the market. More than 95% of the time the FED changed rates AFTER the market had already made a move. It doesn’t stop there. Data shows the same theory applies to other countries.
Financial Times using their writing bots created some fake news. Now, there is a scope for automation. But why use automation, some shops are certainly using interns who work for free. Automation cannot beat slave labor.
It will not be economic data that moves the Fed. It will be the fear of being labeled a serial bubble blower. Since the fear of a euro implosion is the primary driver of stocks, the actual implosion will send stocks soaring, and the Fed following once again. As confidence in govt continues to collapse, rising rates will make the Fed look like a dog biting the tires of a run away car.
They should have begun raising rates 7 years ago. Now there is a sense of urgency? And some still believe that the goofballs at the Fed are not political.
FOMC meetings are always much ado about nothing.All talk no balls!