Tag: The Federal Reserve

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?" →

The Screws Tighten On The Fed As The Fed Readies To Tighten

Posted on by George Yacik

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


If we can believe Janet Yellen – or rather those who believe in what they think she means – then the Federal Reserve is going to raise interest rates at its next monetary policy meeting in December. This is perhaps an appropriate time for it to do so, as it looks like the Fed is about to enter a new era. Pressure is growing on the central bank to reform itself and the way it does business, including making monetary policy.

Once again, the Fed has shown itself to be following rather than leading the market. Last week, in congressional testimony, Yellen said the Fed may raise interest rates “relatively soon,” which most people expect means at its December 13-14 meeting. This in the wake of the recent 60 basis point surge in long-term interest rates since Donald Trump was elected president. The yield on the Treasury’s benchmark 10-year note is up 100 bps since July 8, during which time the Fed has kept rates unchanged.

Yellen told the Joint Economic Committee that “the economy has made further progress this year” toward the Fed’s employment and inflation goals. And indeed recent economic reports have borne that out, including those released last week: Continue reading "The Screws Tighten On The Fed As The Fed Readies To Tighten" →

Trumponomics, Bonds And The Dollar

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


President-elect Donald Trump’s inauguration won’t take place for two more months and yet his proposed economic plan is already sending ripples through markets. Treasury notes and bonds are tanking, stocks are rallying and the Dollar Index has surged to highs not seen in more than 10 years. All of which is in utter contrast to what analysts had expected to occur post-Trump’s election, and which seemingly presents a paradox of sorts. Trump’s two economic focal points are aggressive tax cuts and massive infrastructure investment. Both are expected, according to The Office of Management and Budget, to push the US debt burden by roughly 25% of GDP by 2020. And yet, in conjunction with those expectations, the Dollar is gaining.

Naturally, the most obvious reason would be that higher deficits will lead to inflation and, consequently, would force the Federal Reserve to raise interest rates. But that is a consequence rather than a reason. The real reason is that both the US economy and the US banking system have been ripe for higher rates for a while, and Trump’s plans for the economy, or “Trumponomics” as we like to call it, is merely a catalyst for an already strong economy. Continue reading "Trumponomics, Bonds And The Dollar" →

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?" →