Chicago Fed President Charles Evans still sticks with his rosy economic forecast: Three 2017 Rate Rises Plausible, Four Possible if Inflation Picks Up.
Federal Reserve Bank of Chicago President Charles Evans said the U.S. central bank could raise short-term interest rates four times this year if inflation picks up, but suggested three increases remain more plausible.
“At the moment, I don’t see the data, I don’t have the confidence” for four rate increases in 2017, he said at an event held in Madrid by the Global Interdependence Center. “If I thought that I was inclined to four rate hikes for 2017, I would presumably be seeing a much stronger lift in inflation.”
Mr. Evans said long-term inflation expectations in the U.S. are running below the central bank’s 2% target, even though short-term prices are nearing that objective.
The failure of the health-care bill that was backed by Republican House leaders adds to the uncertainties confronting the U.S. economy, Mr. Evans said. U.S. trade policy is another area of uncertainty. “We’re waiting in the U.S., as around the world, for a better articulation of exactly what the trade policies will be,” he said.
The above “Dot Plot” shows two FOMC participants believe the Fed is done hiking for the year. One participant is truly in Fantasyland, expecting the Fed to hike to the range 2.00 to 2.25. Amazing.
The market thinks it is close to 50% whether or not the Fed hikes in June.
At the December meeting, the market believes two more rate hikes are in the bag, with the third being just over 50% (albeit with a 17 percent chance of more).
I side with the two participants who expect no more hikes.
Mike “Mish” Shedlock
Tony Bennett said:
Evans with truthiness last year on real reason to raise rates.
“Addressing downside shocks near the zero lower bound is much, much harder than if we had a comfortable buffer against the equilibrium real rate.”
They are always behind reality.
Would be no surprise to see that many moves up if full on recession doesn’t hit for a while. They won’t pre-empt a roll-over and only reverse or stick once it’s full-blown.
– I don’t have any confidence that the FED will raise rates at all in the rest of the year. Only a daily glance at the 3 month T-bill rate gives – on a daily basis – a clue what’s going to happen with the Fed’s Fund Rate. Although I think that a rate hike is more likely than a rates remaining flat or a rate cut. We just have to see what the charts are telling us.
– The situation in early March 2017 wasn’t too clear. Looking at the chart I thought the FED wouldn’t raise rates. This was the one of the few occasions that the charts didn’t give me clear signal what would happen. But previous rates hikes were “announced” by the 3 month T-bill rate going up over a clear threshold.
I believe they will raise rates three more times this year – providing the economy doesn’t slip into recession first, and the stock market does not sell off by 10%+. So far, the stock market seems to be taking the expected pace of rate rises in stride, and until it behaves otherwise, I believe the Fed will continue to hike slowly.
Medex Man said:
Small businesses were never able to borrow money at 0% (or anything close). Business loans basically came through vendor financing, because the banks fired all their loan officer staff back in the 1990s (maybe before that).
I don’t think small business is going to be effected by Fed funds — because they were forced to get capital outside the banking system a long time ago.
The bigger constraint has been a lack of qualified worker. Too many snowflakes show up to interviews with their helicopter parent in tow, and the kid has had 4-5 years of political indoctrination at whatever “college”. The parent wrote the essays and did the work that a tutor didn’t. The kid doesn’t even have a job offer and they are already asking about nap time and whether the drug test includes pot.
Then there is the consumer, who is tapped out on debt. And they have closets full of stuff that still has the tag on it.
Note that none of these problems were ever going to get addressed by giving interest free loans to failed banks and failed car companies… rate hikes aren’t going to effect main street either.
The bailout banks and car companies have got some serious problems — and people with retirement accounts are going to be struggling to make up for 10 years of “compounding” at 0%.
Don’t worry though: Bernanke and Yellen both get at least two pensions, one from academia and another from the Fed. Taxpayers on the other hand get a notice their retirement funds are insufficient
Tim Wallace said:
And adds $200 billion to next year’s deficit to further undermine Trump. Why did Obama get 0.13% interest from the FED for his Presidency? So that the interest on the debt would be artificially understated – now, stick it to the Republican.
– Nope. It was Mr. Market that drove short term rates down to (almost) zero. And the FED follows what Mr. Market does.
– You should be glad that interest rates rise because that’s a sign our (US) economy is (finally) recovering. Because when an economy gets stronger then rates (Always) rise.
Medex Man said:
Willy2 coming to you from a comment/click farm in San Fran or from Mumbai?
Obviously a Soros troll where ever he is from
What is this you refer to as a “market”?
The whole point of government and Fed interventions is to prevent a true market from occurring. It’s what they perceive is their MANDATE. Stability through manipulation and distortion…till it ain’t.
Stuki Moi said:
So,per your model, the “Market” in Europe lends out at below 0%???
Absent intervention, while a “weaker” economy does reduce demand for funds, a “riskier” economy reduces supplies of it. And “weaker” generally correlate well with “riskier.” Leaving the net effect on rates indeterminate.
The entire structure of “lender of last resort,” “inflation targets” and baillouts nonsense, was created to prevent the latter effect from working the way it is supposed to. Since the banksters prefer a world where they get the reward, someone else covers the risk. Which is why many today have been conditioned to reflexively make the same erroneous assumption you just did.
The FED will need to raise rates as defaults in high yield debt contaminates investment grade debt.
What the hell is THAT?
Surely you don’t think they would ever allow derivatives to be triggered.
I thought China had taught the world how this is done…..happening real time. No default, just keep printing and rolling the note.
Medex Man said:
I seriously doubt a loser like Yellen raised rates because she wanted to — that sort of rate hike would have happened years ago when the BIS told Bernanke his policies were distorting markets and any chance at recovery.
Yellen is raising rates because she no longer has a choice.
Years ago, Paul Volcker raised rates much further and much higher than what senile Yellen is talking about. It flushed a lot of bad debt out of the system and set the country up for a decade of really strong growth.
Unfortunately Yellen is no Paul Volcker — not even close. She is a clueless buffoon who stuck to a long discredited economic theory… discredited everywhere in the real world but still being pushed in academia where there is no reality check.
Yellen is going to F things up; she was never qualified to be on the FOMC in the first place.
Main Street currently can’t borrow at the Fed’s artificial rates, so her screw ups will mostly impact the banks that got bailouts (and thus did not fix their 2008 business models)
Stuki Moi said:
Wealth, hence political influence, is much more concentrated now than it was when Volcker cranked rates to almost 20%. Virtually entirely amongst financial rackets beneficiaries. So while doing so again, and this time holding them there for a few decades since the imbalances are so much greater this time, would undoubtedly be good for the economy as a whole, it would be disastrous for the financial racketeers. Which is why even Volcker wouldn’t have been able to pull the stunt off today.
Today, it is not exaggerating much to say that the Fed’s only real job, is ensuring financial racketeers have as much of society’s resources transferred their way as possible. All the babble about discredited “economic theories”, exist for no other reason than to obfuscate this goal.
And simultaneously, what passes for mainstream “economics,” exists solely to excuse this state of affairs. Simply because noone from outside the classes benefiting from the Fed wealth transfers can any longer afford to go through the hoops to get a tenured position at a famous department. And all of their students are drawn from the same classes as well. So they all simply “know,” that unless their findings agree that what “we” are doing now works (since, like, everyone I’ve ever met is better off now. I mean, now everyone can afford maids and servants and mistresses because they made, liked, smart investments in their home and stuff…..), the findings simply must be wrong, and needs to be reconsidered.
House Committee Passes Bill To “Audit The Fed”