Fed Hike

michaels

Typically the 'business cycle' lasts 7 years so we are 'due' a downturn....

vivatifosi

worldtraveller wrote: »

I just have to disagree and, if they do today, as we go into next year, I think that we'll see reality sinking in that that they were imprudent in raising rates at this time.

I am with Gen on this one. Interest rates used to tick up and down a quarter of one per cent all the time. It's only a big deal because it has been stuck for so long and they are the first mover.

Interest rates need to go back to being another tool in the armoury. If it doesn't work out, they can move it down again. It's hardly the nuclear option.

wotsthat

I think the Fed have no choice. Yellen promised rates would rise before the end of the year and she'll lose too much credibility if rates don't increase even if it's the wrong decision. An increase of 0.5% might be a surprise but even that would hardly be material.

I doubt the Fed pay too much attention to the BoE but maybe they'll note that Carney has lost credibility by 'promising' rate rises and constantly having to find excuses with the latest being the change in price of oil over a single week.

Generali

wotsthat wrote: »

I think the Fed have no choice. Yellen promised rates would rise before the end of the year and she'll lose too much credibility if rates don't increase even if it's the wrong decision. An increase of 0.5% might be a surprise but even that would hardly be material.

I doubt the Fed pay too much attention to the BoE but maybe they'll note that Carney has lost credibility by 'promising' rate rises and constantly having to find excuses with the latest being the change in price of oil over a single week.

This credibility thing is a nonsense. Dr Yellen doesn't have to justify her credibility: she's Chairman of the Fed !!!!!!!

If the FOMC doesn't want to raise rates then they won't. A simple, 'things have changed so we're not raising' would be perfectly adequate.

wotsthat

Generali wrote: »

This credibility thing is a nonsense. Dr Yellen doesn't have to justify her credibility: she's Chairman of the Fed !!!!!!!

If the FOMC doesn't want to raise rates then they won't. A simple, 'things have changed so we're not raising' would be perfectly adequate.

Respect and, especially, credibility have to be constantly earned. They start to be lost if you promise* one thing and do another.

* I know she didn't explicitly promise rate rises but she absolutely intended to ensure that was the expectation. A 'things have changed..' statement would be perfectly adequate but it would chip away some of her credibility and the Chairman of the Fed needs to be beyond credible.

Central bankers have the power to say they're going to do things to influence behaviour and then not do anything (because the behaviour changed as a result of their words). This requires a huge credibility and if it's lost people will ignore what they say. A fine balance between words and actions.

Generali

wotsthat wrote: »

Respect and, especially, credibility have to be constantly earned. They start to be lost if you promise* one thing and do another.

* I know she didn't explicitly promise rate rises but she absolutely intended to ensure that was the expectation. A 'things have changed..' statement would be perfectly adequate but it would chip away some of her credibility and the Chairman of the Fed needs to be beyond credible.

Central bankers have the power to say they're going to do things to influence behaviour and then not do anything (because the behaviour changed as a result of their words). This requires a huge credibility and if it's lost people will ignore what they say. A fine balance between words and actions.

Nope. The FOMC will set strategy as they see fit.

Electrum

Doomed if they raise rates doomed if they postpone

They have already lost all credibility, well I suppose they could try and claw some back

I predict a quarter point raise, then stock markets will start to crash, and next Fed meeting they will go back down to zero, but its too late they have no more bullets to fire.

Stocks continue to crash and they try negative rates, but then there is a run on the banks and chaos ensues

Generali

Electrum wrote: »

Doomed if they raise rates doomed if they postpone

They have already lost all credibility, well I suppose they could try and claw some back

The Fed hasn't lost credibility and they are not doomed.

If you are better at macro-economics than Dr Yellen and her crew then you are presumably running a macro fund somewhere and are worth hundreds of millions.

wotsthat

Generali wrote: »

Nope. The FOMC will set strategy as they see fit.

I'd find it difficult to believe what they see fit today won't be influenced in some way by what they've previously led the markets to believe will happen.

wotsthat

Electrum wrote: »

Doomed if they raise rates doomed if they postpone

They have already lost all credibility, well I suppose they could try and claw some back

I predict a quarter point raise, then stock markets will start to crash, and next Fed meeting they will go back down to zero, but its too late they have no more bullets to fire.

Stocks continue to crash and they try negative rates, but then there is a run on the banks and chaos ensues

All that from a 0.25% increase in base rates - wow!