Can You Imagine The Fed Raising Interest Rates In This World? Europe In Chaos Edition
By: John Rubino
GoldSeek.com
Thursday, 7 July 2016
Two short months ago it was generally expected that US interest rates would rise for the balance of the year — a move made possible by steady economic growth and general global stability. Here’s a representative piece of reporting from early April:
WSJ Survey: Most Economists Expect Next Fed Rate Increase in June
Most private forecasters surveyed expect the Federal Reserve will leave short-term interest rates unchanged at its April policy meeting, and next raise them in June.
Nearly 75% of business and academic economists polled by The Wall Street Journal in recent days said the Fed would next raise its benchmark federal-funds rate at its June 14-15 policy meeting, down slightly from 76% in the Journal’s March survey.
The Fed in December raised its benchmark federal-funds rate to a range of 0.25% to 0.50% after holding it near zero for seven years, and pledged to raise it gradually in coming years. It held rates steady at its policy gatherings in January and March, citing weak inflation and global economic and financial uncertainty.
Fed officials at their March meeting expected to raise the fed-funds rate by a half a percentage point this year. That implies a slower pace than they predicted in December, when they penciled in a total increase of a full percentage point by year’s end.
The private forecasters on average saw the fed-funds rate at 0.84% at the end of 2016, suggesting two quarter-point rate increases this year.
Just one economist—Bricklin Dwyer of BNP Paribas—said officials would wait until after 2017 to raise rates, while Vanderbilt University professor J. Dewey Daane said he wasn’t expecting another rate increase.
Ah, the good old days, when crises were few and mostly far away, governments could be trusted to cope, and the Fed could use terms like “normalize” with a straight face. Now, alas, it’s all about damage control — and rats jumping ship. Some components of the gathering storm:
Brexit fallout. Several interesting post-vote developments include a plunging pound sterling, decapitation of the major UK political parties, and — much more serious from a financial stability point of view — a wave of withdrawals from UK property funds that have forced a total of 6 to halt redemptions. That’s reminiscent of those Bear Stearns hedge funds that did something similar just before the Great Recession hit.
The Rest…HERE
