It seems like this has been an on going debate in many parts of the world, the US seems to be showing some good signs of recovery and unemployment rates are at a seven year low this seems like it might be a good time for the US to raise interest rates, but what about the global economy, is this the right time for the US to increase its lending rates considering the potential disturbance it could cause in the global financial market?
This is the big question no one is talking about. Will consumers and countries be able to handle a rate increase or are we too debt laden?
In no particular order, I found thsee recent articles to be of interest. http://www.bloomberg.com/news/artic...stions-inflation-mastery-sought-by-draghi-co- http://www.theatlantic.com/business...eserve-fed-interest-rate-jackson-hole/402931/ http://www.cnbc.com/2015/08/30/worl...-for-us-interest-rate-hike-so-dont-delay.html I wouldn't be surprised if the Fed fails to move the rate in September or December. Politics -- campaigns and primaries -- will affect the timing and size of the rate increase. Assuming Obama and Jarrett want to keep the Dems in the WH, back channel pressure will be ramped up on Yellen to make the "right" decision regardless what the numbers say. I just don't believe the world bankers' wishes or the yuan currency business will have any significant influences on what the WH decides to engineer. But that's me. HTH. YMMV.
I don't think the FED will touch their interest rates during 2015. But 2016... probably. And it's more about the US economy and the strenght of the dollar rather than global issues.. though those do also have their own effect. If the USD is very strong then that will be a problem as a rate hike would just make it even stronger.
I don´t think they will do one in 2015. I think they understand the world is too connected now and although there may be some cause for concern in the USA in regards to inflation coming soon ( low unemployment levels).. I don´t think there is anything immediate that would make them be aggressive.
Good question. Listening to the Fed governors at Jackson Hole it doesn't sound like the September cut is off the table (then again, they would have to imply that anyway). I think the market is going to have an interesting few weeks in the run up to it. If the cut doesn't come, expect a bit of a rally. If it does, expect a bit of market panic (unless, of course, the market thinks that a cut suggests the US is healthier than we'd all assumed - the games we have to play interpreting the Fed....).
Yeah, it's way past time we normalize. Zero is a short term fix for temporary problems so that they don't become complete disasters. We should have gone to a quarter point 3-4 years ago. Not saying we should be at 5%, or even 1%, but zero for 7 years is ridiculous. We obviously aren't doing all that great, or else we wouldn't still be so low (much less at zero), but I agree that we may be seeing a Fed that is caving to political and stock market pressures. If we have another recession or other problems in the future, there's nowhere to go down from zero.
Meanwhile, the former bond King hasn’t been immune to the volatility in markets. Gross’s $1.5 billion Janus Global Unconstrained Bond Fund lost roughly 2.9% last Monday. Unlike typical bond funds, Gross’s fund invests in a variety of securities, and is hence “unconstrained.” He plays things one way and is losing, so instead of accepting he is wrong, he blames the Fed. Also the word ´normalization´ ... WTF is that? The world is evolving, we do not need interest rates to be the same place they were in 1985 just because that is where they were in 1985. China is crashing, Russia is crashing, the EU is not doing well... and most importantly, the world economy is connected more closely than it ever was in history. The US economy today is vastly different than it was in 1985, so saying ´normal interest rates´ is like saying we don´t need red lights in cities because they didn´t have them in 1850. We don´t need the same interest rates as was ´normal´ because the world economy is different now than it ever was. There is very little indication of inflation, and with everything going on across the world, there is very little risk it is coming soon. So other then some people who lost a ton of money investing badly wanting to make excuses on why they lost a ton of money... interest rates are fine. Yes yes, do as this guy recommends.. put more of your holdings in ´cash´.. just like the people who missed the last 8 years of stock market gains.
What "normal" means to me is something along the average long term inflation. So I'm guessing that would be somewhere between 3 and 4% nowadays for the USA... just throwing the number out there but that can't be too far. Because anything lower than that and the one lending the money is losing... and I'm sure we all understand why that is just silly. Once again I agree with JR... the FED is simply carving into stock market pressure. They are afraid that raising the interest rates would cause a crash so they are postponing the decision again and again.
