Fed's Surprise Rate Cut Before Next FOMC??

[schizo]

The market is experiencing turmoil very similar to early 2008. In early 2008, the Fed convened an emergency session and took a bold action by announcing a surprise rate cut of 75 basis points between regularly scheduled meetings, which was in addition to another half-point cut that followed from the following week's regular policy meeting. Shortly afterward, CNBC reported a mixed response among the analysts:

Some analysts viewed the Fed's surprise move, which came just a week ahead of its next regularly scheduled meeting on Jan. 29-30, as a timely and much-needed effort to shore-up deteriorating confidence in global markets. Others said it signaled a sense of desperation. "Plainly the Fed realized that to try to stay ahead of the market they had to act immediately. That is the positive reading of the action," said Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut. "The negative viewpoint is that it smacks of panic."
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Although I ain't sure there's much to cut, will we see a similar surprise rate cut by the Fed before the next FOMC meeting, which is scheduled for March 15-16?

 

[Lights]

The market is experiencing turmoil very similar to early 2008. In early 2008, the Fed convened an emergency session and took a bold action by announcing a surprise rate cut of 75 basis points between regularly scheduled meetings, which was in addition to another half-point cut that followed from the following week's regular policy meeting. Shortly afterward, CNBC reported a mixed response among the analysts:

Some analysts viewed the Fed's surprise move, which came just a week ahead of its next regularly scheduled meeting on Jan. 29-30, as a timely and much-needed effort to shore-up deteriorating confidence in global markets. Others said it signaled a sense of desperation. "Plainly the Fed realized that to try to stay ahead of the market they had to act immediately. That is the positive reading of the action," said Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut. "The negative viewpoint is that it smacks of panic."
​

Although I ain't sure there's much to cut, will we see a similar surprise rate cut by the Fed before the next FOMC meeting, which is scheduled for March 15-16?

these bearish sentiments reflect current open interest....

 

[der_kommissar]

The market is experiencing turmoil very similar to early 2008. In early 2008, the Fed convened an emergency session and took a bold action by announcing a surprise rate cut of 75 basis points between regularly scheduled meetings, which was in addition to another half-point cut that followed from the following week's regular policy meeting. Shortly afterward, CNBC reported a mixed response among the analysts:

Some analysts viewed the Fed's surprise move, which came just a week ahead of its next regularly scheduled meeting on Jan. 29-30, as a timely and much-needed effort to shore-up deteriorating confidence in global markets. Others said it signaled a sense of desperation. "Plainly the Fed realized that to try to stay ahead of the market they had to act immediately. That is the positive reading of the action," said Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut. "The negative viewpoint is that it smacks of panic."
​

Although I ain't sure there's much to cut, will we see a similar surprise rate cut by the Fed before the next FOMC meeting, which is scheduled for March 15-16?

Rates were sitting at 5.25% at some point in 2007...IOW, Yellen should have been raising rates while she had the chance (if she saw some future need for aggressively cutting rates again once the market hit another down cycle)...Of course, the increased rhetoric about NIRP is probably foretelling, but this market has barely retraced the move from the 2009 lows...but wtf knows with these CB's nowadays.

 

[der_kommissar]

btw, "open mouth operations" are still going according to schedule...Notice the "timing" of a few of the recent ones...bounce off of 1871.50 a few weeks back and the backtracking and more policy support mid-last week...and not to be outdone, the "timely" Abe news heading into month end which propped the ES up to that resistance level on Feb 1...

Basically every week, one of the CB's has a scheduled talk where they can suggest any radical policy they see fit and the algo's will trace out the major S/R...So if this thing tags that 1780 area, I'm sure there will be one of the bunch going all in on the OMO.

 

[Pricechange]

yea,... the're going to cling to this empty teat, cry for it, tantrums, threaten suicide, 'act out aggressively' for it, make threats, yammer at the mouth incessantly for it.....weaning a child after breast feeding him till he is 12

but really, as komish just said, rates should have been raised "years" ago and should be much higher right to to fend off a down turn. At any rate, they have been orchestrating the case for a 'solid recovery' and very good employment growth and 'there is not going to be a recession in the US' brain washing...so any rate cut now would be seen as a sign of major problems in the US 'economic story'.

If anything, with the last employment number, they really should hike again before May.

Hey, they live by the bogus numbers and they die by the bogus numbers. That's just the way the cookie crumbles.

schizo, the quicker you move on and start to look at things other than the teat, the more clarity you will have in your investments. I don't see the fed playing any major role in US markets for some years to come. And even then, US will be a different landscape...much more akin to UK's very very slow growth, crumbling infrastructure, strong currency and highly protective trading environment

 

[syswizard]

I voted NO.
However, some time in 2016, the Fed will be forced to reverse policy and go to ZIRP once again...and then later to NIRP.
That's when the "rip your face off" rallies will occur.
Until then, you can short all rallies safely. It appears SPX at 1250 is very possible before this occurs.

Yellen obviously made the recent rate hike at EXACTLY THE WRONG TIME....thinking that the US job market was strong. She was "too late"...it had already turned down. Oh, how wrong she was.....
http://www.marketwatch.com/story/heres-another-sign-us-jobs-market-has-gotten-softer-2016-02-08

 

[Tsing Tao]

If you look around, (with the exception of the lunatics running the asylum in Japan) the push by big banks, the whispers around the Fed, and the financial media is that low rates, easy money and massive liquidity is what got us into this problem. This is a good thing. I could be wrong here, but I'm beginning to think that Yellen sees this problem and is intent on getting out of it - even if it causes some pain in the beginning. She's not looking for chaos, so she's trying to back the Fed out of the corner it painted itself in, but she won't be looking to cut. We'll see in her congress testimony, but I expect her to call out risks, and highlight (false) positives but stress that normalization is important for rates (normalization for us is now about 2% max - still laughable).

Even Kooky Kuroda is seeing that his latest move has caused nothing but disaster in Japanese financial markets - he won't be going more negative after this. Every time he's shocked the market it's always been positive for stocks and for the Yen (the yen has gone lower). Not this time. Now he sees the writing on the wall - any further easing will make things worse, not better.

The times, they are a changin'. It could be (dare I hope) that central bank jackasses around the world have realized that QE doesn't really work in anything other than a short burst, and that getting out of it is the best thing for the global economy. Risk must be correctly priced. Money has to follow smart investing principles, not just a search for yield.

The problem at this point, however, is momentum. Negative rates, QE, etc. has such momentum that its going to require a massive effort to reverse.

 

[Pricechange]

If you look around, (with the exception of the lunatics running the asylum in Japan) the push by big banks, the whispers around the Fed, and the financial media is that low rates, easy money and massive liquidity is what got us into this problem. This is a good thing. I could be wrong here, but I'm beginning to think that Yellen sees this problem and is intent on getting out of it - even if it causes some pain in the beginning. She's not looking for chaos, so she's trying to back the Fed out of the corner it painted itself in, but she won't be looking to cut. We'll see in her congress testimony, but I expect her to call out risks, and highlight (false) positives but stress that normalization is important for rates (normalization for us is now about 2% max - still laughable).

Even Kooky Kuroda is seeing that his latest move has caused nothing but disaster in Japanese financial markets - he won't be going more negative after this. Every time he's shocked the market it's always been positive for stocks and for the Yen (the yen has gone lower). Not this time. Now he sees the writing on the wall - any further easing will make things worse, not better.

The times, they are a changin'. It could be (dare I hope) that central bank jackasses around the world have realized that QE doesn't really work in anything other than a short burst, and that getting out of it is the best thing for the global economy. Risk must be correctly priced. Money has to follow smart investing principles, not just a search for yield.

The problem at this point, however, is momentum. Negative rates, QE, etc. has such momentum that its going to require a massive effort to reverse.

Finally....finally somebody said it. Hundreds of hours looking and reading threads on ET and this is the first time anyone here has come right out and said that all this ZIRP and QE has been what the real problem is and is still what the real problem is. It didn't work in 2000 and was made worse in 2008/2009 and now here we are. And whats worse is that Japan and the EU also are now drinking this toxic kool aid in large quantities. So its not just the US economy running on a fraudulent lie but now most of the western world is. If it were just US, I would think Germany would be able to back stop worst case situations...but that is no longer.

But the only way out of all this insanity is to take a NATURAL DOWNTURN and live with it...growth and learn from it and become leaner and more competitive after the fact. We could have done this easily in 2000.....

But Now, it will be VERY PAINFUL....globally painful and longer term painful.

And yes I fully agree. I think Yellen realizes this (there was a moment of clarity a few months ago as she was standing on the stage in Amherst). It happens maybe a few times in a lifetime when all the way down to your gut you suddenly realize that you are faced with a truth and you have, at that point in time, the chance to make a change or correct a terrible wrong which you have just fully realized is there. Ben flipped her a pile of shit (he should have started raising rates in 2012) and Greenspan was builder and major contractor of the pile. But I think she has realized that she must be the one to take the lumps and undo all this QE and ZIRP. I think four rate hikes is very necessary this year.

Negative rates here would be like dropping the life boats and that is not at all necessary. We can work through this but it will take time and some pain.

 

[Pricechange]

Yellen was asked point blank regarding the recent turmoil whether she had plans to lower rates or utilize a twist intervention and she stated that economic growth and employment growth was meeting targets and that the Fed had no plans to reduce rates or add accommodative measures going forward.

I think she is going to stick this out and stay tough. Looks like she will stay the course with four hikes and finally get us out of all this ZIRP and QE and just allow free markets to work as they should

 

[S2007S]

Fed is going to cut.. There are suppose to be 4 rate hikes this year but after the job number miss and pathetic GDP figures those hikes are OFF the table... Not only that but they keep talking NEGATIVE INTEREST RATES so if anything fed will cut to 0% and go NEGATIVE rates by end of year.. .there is global economic weakness throughout the world economies... Growth was never there to begin with it was all make believe these last 6-7 years with nothing but printed trillions and historical low interest rates to create an illusion of growth....