Fed Hike

Aberdeenangarse

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

You ought to go to the doom and gloom site HPC. They've been predicting meltdowns for the last eleven years. Muppets 50% up by Christmas............GUARRANTEED !

MFW_ASAP

I'd hope that credibility is earned on making informed decisions based on current conditions and future projections rather than based on the egos of central bankers. I have no issue with Carney postponing his rate rise decisions if the market conditions change. He's not a politician who is elected on his ability to deliver promises. His main role is to ensure the stability and growth of the UK economy. If raising rates puts that in jeopardy then he's right to keep them static, regardless of his previous statements or predictions.

purch

They are not even really "raising" rates.

Just their Fed Funds Target, which means they will be paying Banks a higher rate for deposits in order to push Funds into the target range.

downshifter98

A small increase plus reassurances that further increases will be carefully considered and not automatic will stop markets misbehaving. Eventually negative rates will make an appearance - just not yet.

princeofpounds

The notion of 'credibility' in terms of monetary policy that is enacted by an institution such as the Fed, and the notion of credibility as it is used in normal language is quite different.


It essentially refers to the traction that monetary policy has on inflation expectations, which of course are a psychological/behavioural variable.


https://www.kansascityfed.org/PUBLICAT/ECONREV/econrevarchive/1988/3q88sibe.pdf
http://www.nber.org/papers/w7161
http://www.nber.org/papers/w20824


It's not about whether the Fed does what people think it should do (indeed surprise is a strong influence on credibility) or whether Yellen can give a good presentation or whatever.

worldtraveller

IMHO, it's really simple! If the Fed increases rates today, it will definitely be, in part at least, due to trying to maintain credibility. IMHO, Yellen is as clueless as the mainstream media and the usual pointless ivory-towered economists.

The further problem, though, IMHO, is that the Fed are likely to lose any of that credibility anyway, that they have tried to maintain, should they increase rates, when, as I still believe, the global economy heads for a downturn next year and the increase is then seen as imprudent.

BTW, here's a statement made by Yellen back in 2006 with regards credibility:



As always, only time will tell, so it's pretty pointless discussing further until we see how things pan out next year.

CLAPTON

MFW_ASAP wrote: »

I'd hope that credibility is earned on making informed decisions based on current conditions and future projections rather than based on the egos of central bankers. I have no issue with Carney postponing his rate rise decisions if the market conditions change. He's not a politician who is elected on his ability to deliver promises. His main role is to ensure the stability and growth of the UK economy. If raising rates puts that in jeopardy then he's right to keep them static, regardless of his previous statements or predictions.

nonsense

he is right to keep his mouth firmly shut unless he has something to say.

purch

vivatifosi wrote: »

Interest rates used to tick up and down a quarter of one per cent all the time.

It was Greenspan, or to put it correctly the FOMC under Greenspan who started the trend for 1/4 % movments.

In current circumstances a move of that size is relatively large, so a little nudge to the Funds target is more likely.

There is no need to move the Discount Rate, and if they do that will be a much stronger message.

worldtraveller

Federal Reserve policymakers voted unanimously to raise rates
All ten FOMC members voted to tighten policy.

BREAKING: Federal Reserve policymakers vote to raise rates for the first time since 2006. The benchmark Federal Funds Rate has been raised by 0.25%, from a previous target of 0 to 0.25% to 0.25 to 0.5%.

CLAPTON

so increase by 0.25%
will Armageddon follow tomorrow or shall we have Christmas first?