Tag: Federal Open Market Committee (FOMC)

Fed Paves The Way For Broad Dollar Rally

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


The last FOMC meeting for 2016 has concluded, and the outcome is a slightly more hawkish tone than investors initially expected. The Fed has hiked the federal fund’s target rate by 25bps to 0.75% for the second time in two years. However, this hike was largely in line with the consensus expectations.

What caught investors by surprise was the revision of the Fed’s projection for rates in 2017. A revision that demonstrates that the median of estimates by the Federal Reserve members point to not two rate hikes, as in the September meeting, but three. Experience suggests that investors should take the Fed’s revision with a pinch of salt. After all, it was only this year that we witnessed the Federal Reserve revise its rate projections down, a move that followed an increase earlier in the year. And yet, judging by the reaction of Treasuries and the dollar, this revision is taken with some gravity. In fact, it paves the way for another dollar higher. The question is why? Continue reading "Fed Paves The Way For Broad Dollar Rally" →

A Fed Rate Hike Next Week Is A Lock - Right?

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


An interest rate increase at next week’s Federal Reserve meeting would seem to be a foregone conclusion. The Fed would look downright foolish if it didn’t raise rates. But can we take anything for granted when it comes to the Fed making rate decisions?

On the surface, you would have to guess that there is almost no chance the Fed will leave rates alone at next week’s meeting. Indeed, that’s what the bond market and the federal fund's futures market are saying.

The three-month Treasury bill is currently trading at 0.50%. That’s nearly triple the 0.17% it was trading at on September 20, which was also its lowest point this year. It’s also more than double the high end of the Fed’s current fed funds range of 0% to 0.25%. Given that comparison, the Fed would look seriously out of touch with reality if it didn’t raise rates at least 25 basis points this time around. If anything, the Fed is now playing catch-up, not leading the markets. In any event, rates are going up regardless of what the Fed does or doesn’t do. Continue reading "A Fed Rate Hike Next Week Is A Lock - Right?" →

Finally, The Fed Does Something Right

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


Like many people, I have been angered and outright disgusted by the mainstream media’s disgraceful behavior during the recent presidential campaign. Back in the late 1970s, when American journalism as we used to know it still existed, my college professors taught us that one of the purposes of a free press is to serve as a watchdog over the government. Since then that noble idea has been turned on its head, as a good part of the media has become an operating arm of the ruling class and one of the two major political parties.

But what particularly bugs me is when this liberal bias crops up where I don’t expect nor want to see it. In this case, I am referring to Bloomberg and its sister Businessweek magazine, of which I have been an avid reader and subscriber for the past several years. Unfortunately, this otherwise excellent business and financial news source has succumbed to the same liberal cheerleading as its mainstream brethren. Continue reading "Finally, The Fed Does Something Right" →

Will There Be A November Surprise?

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


In its most recent Beige Book, covering late August through early October, released last week, the Federal Reserve noted that although economic “outlooks are positive, contacts in several sectors cite the upcoming presidential election as a source of near-term uncertainty, delaying some business decisions.”

The same could be said for the Fed itself. How much uncertainty has it created and business decisions has it delayed by its endless dawdling and indecisiveness on whether or not to raise interest rates? No matter who wins the vote, the election will end – maybe not on November 8, if it can be shown that someone did, in fact, rig the voting – but eventually, Donald Trump or Hillary Clinton will become president. But we have no such certitude that the Fed won’t continue to tease the markets about when it will start normalizing monetary policy. Continue reading "Will There Be A November Surprise?" →

The Fed Tease Continues - But For How Much Longer?

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


Way back in high school, my freshman algebra teacher told us about Zeno’s Paradox, which the Greek philosopher (Zeno, not my teacher) explained through the story of Achilles and the Tortoise. According to the story, the two were engaged in a footrace, but no matter how much faster Achilles could run compared to the tortoise, he could never quite catch up to him. Why? Because while Achilles could consistently halve the distance between himself and the slower-footed reptile, the gap between the two could be reduced fractionally an indefinite number of times, so, therefore, he could never catch up – theoretically speaking, of course.

I was reminded of that story when I read the media headlines about the release last week of the minutes of the Federal Reserve’s September 20-21 meeting. Once again, the Fed said it was almost, but not quite, ready to tighten monetary policy. This time, the Fed used the words “relatively soon” to describe the timing of its next rate increase, which would be the first one since last December.

“Several members judged that it would be appropriate to increase the target range for the federal funds rate relatively soon if economic developments unfolded about as the committee expected,” the minutes said. Also, those members – still the majority – who still wanted to “await further evidence” before voting for a rate hike said it was a “close call” in their decision to wait.

In other words, like Achilles chasing the tortoise, the Fed just keeps getting closer and closer to raising rates but just never gets to that point. Continue reading "The Fed Tease Continues - But For How Much Longer?" →