LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Will the Historic Imbalance in Gold Stocks to Gold Price Resolve?
By: Rambus

The Staggering Amount Of Gold & Silver Investment Since The 2008 Financial Crisis
By: SRSrocco

What If 'Everyone' Correctly Smells a Top Here?
By: Rick Ackerman, Rick's Picks

Precious Metals Update Video: Gold up as people ran into safe havens
By: Ira Epstein

COT Gold, Silver and US Dollar Index Report - March-22-2019
By: GoldSeek.com

Gold Mid-Tiers’ Q4’18 Fundamentals
By: Adam Hamilton, Zeal Research

Self-Destruction: Cheerleading the Process
By: Gary Christenson, Deviant Investor

The U.S. Economy Is In Big Trouble
By: Dave Kranzler

Gold Resource Corporation Mirador Mine Development Crosscuts 6 Meters of 992 Grams Per Tonne Silver
By: Gold Resource Corp.

Central Banks Are Messing With Your Head
By: Thorsten Polleit

 
Search

GoldSeek Web

 
The 10th Man: There Will Be No Rate Hike in June


 -- Published: Thursday, 19 March 2015 | Print  | Disqus 

By Jared Dillian 

You might have heard that the FOMC removed the word “patient” from its directive yesterday, in that it would no longer be “patient” in waiting to remove monetary policy accommodation.

Lots of people were betting—have been betting for weeks—that this would be the meeting where Janet Yellen would lay out the path for a rate hike in June. The dollar has gone straight up against just about every G10 currency.

They did remove “patient.” But in the end, the Fed folded—as they always do.

Writing in other forums, I have been making the case for a long time that the Fed has no intention of hiking rates, possibly ever. They want to want to hike rates, but they don’t really want to hike rates.

Possibly, they understand that raising the fed funds rate a tiny bit after six years of it being essentially zero would throw the financial markets into a tailspin. So they keep waiting for that perfect economy and look for excuses along the way not to hike.

This time: not enough inflation.

What the FOMC did was to replace the word “patient” with the words “reasonably confident.” I quote, from the directive:

It will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. (emphasis mine)

It is worth pointing out that inflation, as expressed by the Fed’s favorite measure, Core PCE, shows no signs of approaching two percent.

I had said before that the Fed was not going to hike with inflation at 1.3%, because there is no reason to hike when inflation is 1.3%—not when the chairman graduated from Brown in ‘67 and Berkeley in ‘71 and doesn’t really care about inflation. Not when a number of Federal Reserve officials have expressed their willingness to let the economy run hot to ensure that we won’t experience deflation.

If you don’t know the Fed, you might look at this and say, “Gee, they got rid of ‘patient,’ so that means they’re going to hike in June, right?”

No. They’re not going to hike in June. There will be no rate hike in June… or anytime soon.

The directive explicitly states that there will be no rate hike in April. Remember: the Fed will not hike because it wants to. It will only hike because it has to. And inflation has to go a lot higher—a lot higher—before it has to.

In the short term, this means a reversal of recent trends. We will temporarily experience a weaker dollar, stronger metals, higher US stocks, and stronger emerging markets. The bond market is bid again (much to my consternation), with two-year notes rallying over 15 basis points yesterday as Fed hikes start getting priced out of the curve.

Pretty much anyone who has bet on rate hikes in fed funds or Eurodollar futures in the last five years has lost. And they will continue to lose.

I can see a scenario where the unemployment rate is actually in the four handle and the Fed is still not hiking rates.

I expect that sometime between now and the April meeting, various Fed speakers will do their best to weasel out of any remaining expectations that there will be a June rate hike. They will walk that back. Then they will walk back July, and then September, and before you know it, whoops, it’s an election year. You can’t hike in an election year.

First rate hike 2017? Sounds about right.

I try to be cynical, but it is hard to keep up.

Jared Dillian
Jared Dillian


| Digg This Article
 -- Published: Thursday, 19 March 2015 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.