Fed Tightening? Not Now

[Altavest_Erik]

The time to be dovish was when the crisis struck and the economy needed extraordinary monetary accommodation. The time to be more hawkish was earlier in this decade, when the economic cycle had a long runway, the global economy ample momentum, and the future considerably more promise than peril.

This is a time for choosing. We believe the U.S. economy can sustain strong performance next year, but it can ill afford a major policy error, either from the Fed or the rest of the administration. Given recent economic and market developments, the Fed should cease—for now—its double-barreled blitz of higher interest rates and tighter liquidity.

https://www.wsj.com/articles/quantitative-tightening-not-now-11544991760

 

[JSOP]

Fed should leave the interest rates alone until the trade situation with China is stabilized a bit. In terms of timeline, it looks like we won`t see a hike this December but would definitely see some next year unless we really get a recession or a hint of one. My personal take.

 

[helpme_please]

Seems like when the stock market drops enough, the Fed is pressured to abandon its data-driven approach and be servant to the stock market. Not saying this is bad but it simply shows how powerful the stock market is when it comes to dictating economic policies.

 

[S2007S]

I think if there is no hike tomorrow the markets will question the reason for being that the fed knows the recession is coming and if they eliminate all rate hikes for 2019 they will know for sure the fed knows the recession is upon us..

 

[bjw]

tomorrow's hike is fully priced in. the fed would be crazy not to pull the plug. they might just spook the markets into thinking we're heading for big trouble, instead of having the opposite effect. seem like the most sensible thing to do for the fed is raise rates, but make a few comments here and there to the same effect as powell did last month: that further tightening will be less agressive, and we're near neutral. if that won't relax the markets, nothing will.

 

[JSOP]

Seems like when the stock market drops enough, the Fed is pressured to abandon its data-driven approach and be servant to the stock market. Not saying this is bad but it simply shows how powerful the stock market is when it comes to dictating economic policies.

Well if you read all their statements they do state that they do monitor closely asset market and global economic condition and do take them into consideration in their decision-making. So they are not necessarily "servant to the stock market" but they do monitor what's going on in all the asset markets, not just in stock markets.

 

[Stockolio]

Seems like when the stock market drops enough, the Fed is pressured to abandon its data-driven approach and be servant to the stock market. Not saying this is bad but it simply shows how powerful the stock market is when it comes to dictating economic policies.

The Fed data driven approach you mention is about Inflation and tightening its balance sheet without crashing the economy, with 4.5 trillion in QE they did, it equalled -300 bps, which would be 1.5 T per -100 bps, or 375 Billion per -25 bps, do you really think the US economy which is the most important economy in the world can handle that much being taken out over the span of a few months, with THREE previous tightening within the same year ? Money is being sucked out of the bond market at a furious rate... Brent Crude was 85 a barrel Oct 1 2018, it is at 60 now, a 29 % decrease. Look at Emerging Markets, Asia, Europe, Commodities.... We are clearly in a deep deflation cycle, I recall one smart man saying only once has the Fed ever raised interest rates in a deflation cycle, and they hiked them right into a recession in the 20s or 30s

Let me know your reply, I would like to get a data/number backed evidence reply to this argument, not a personal opinion please

 

[S2007S]

The fed bubble is finally collapsing... remember all they had to do was let the free markets do what they had to do back during the last financial crisis, but they didn't...they had to intervene and because they did the next crisis will be even heavier than the last.

 

[Stockolio]

The fed bubble is finally collapsing... remember all they had to do was let the free markets do what they had to do back during the last financial crisis, but they didn't...they had to intervene and because they did the next crisis will be even heavier than the last.

Canada and US are in much much better shape tho. It is gonna get really, and I mean really bad for countries like Japan, UK or Scandinavian countries who's interest rates are virtually 0. I looked at UK's mortgage industry rates, mortgage rates vary from 1.39 to 1.69 with good credit, where is the wiggle room when a correction happens ? Even lowering mortgage rates to 0.8 wont do anything, there only way out is mass deflation of assets and negative interest rates reaching -1 or -2 % in bank to force people to spend, legalized theft if you ask me. Thank god I am in Canada, it wont be too bad here compared to elsewhere. US will be fine also in my opinion

 

[S2007S]

Canada and US are in much much better shape tho. It is gonna get really, and I mean really bad for countries like Japan, UK or Scandinavian countries who's interest rates are virtually 0. I looked at UK's mortgage industry rates, mortgage rates vary from 1.39 to 1.69 with good credit, where is the wiggle room when a correction happens ? Even lowering mortgage rates to 0.8 wont do anything, there only way out is mass deflation of assets and negative interest rates reaching -1 or -2 % in bank to force people to spend, legalized theft if you ask me. Thank god I am in Canada, it wont be too bad here compared to elsewhere. US will be fine also in my opinion

I have mentioned negative rates in the US many times, it's going to happen...the fed took too long to raise rates and because of that the next crisis will send rates to zero within weeks, after zero it will be negative rates as liquidity tightens and eventually dries up. Once the credit market freezes the fed will have only one way to go and that will be negative interest rates!!!!