Revamping the Fed: The Time is Now

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


Last November, shortly after the election, I wrote a column that discussed the “claustrophobic, one-dimensional, group-think atmosphere” at the Federal Reserve. “With just a couple of exceptions, everyone on the Fed, voting or non-voting, is an economist, teaches economics, or worked in the banking industry on one side or the other,” I wrote then. No business people, no small business owners, no one “who lives and works in the real world, who has to deal with the edicts the Fed hands down.”

“Wouldn’t that perspective – even one – be a useful new voice to be considered when making monetary policy?” I asked. Continue reading "Revamping the Fed: The Time is Now"

Top Five Reasons Why the Fed Won't Raise Rates This Month

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


Eric Rosengren, the president of the Federal Reserve Bank of Boston, singlehandedly spooked the financial markets last Friday when he commented that “a reasonable case can be made” for the Fed to start raising interest rates soon, which traders and investors interpreted to mean as early as next week’s FOMC monetary policy meeting.

“If we want to ensure that we remain at full employment, gradual tightening is likely to be appropriate,” Rosengren said. “A failure to continue on the path of gradual removal of accommodation could shorten, rather than lengthen, the duration of this recovery.”

While I certainly don’t have any issue with what Rosengren said – I think the Fed should have started raising rates two years ago – I’m a little puzzled what exactly he said that put the markets to flight. He didn’t seem to say anything that other Fed officials, including Janet Yellen, hadn’t also said periodically recently, plus he didn’t offer any imminent schedule for raising rates. Yet that was apparently enough to get stock and bond traders to bail. Continue reading "Top Five Reasons Why the Fed Won't Raise Rates This Month"

The Gang That Couldn't Shoot Straight

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


Is a July rate increase back on now because of the strong June jobs report? If not July, then September?

June’s unexpectedly strong 287,000 gain in nonfarm payrolls – more than 100,000 above Street forecasts – has some people believing that the Federal Reserve will now once again change its mind and increase interest rates sometime this summer, either later this month or at its September conclave.

But the bond market isn’t buying it, and neither am I. The yield on the benchmark 10-year Treasury note ended last Friday at a new record low of 1.36%, down eight basis points for the week. That doesn’t sound like bond investors believe that a rate increase is imminent. And it’s hard to believe that the Fed, which won’t make a move unless the sun, moon and stars are in perfect alignment, will suddenly take the big rebound in nonfarm payrolls as the green light to raise rates. It will take a lot more than that. Continue reading "The Gang That Couldn't Shoot Straight"

Will The Fed Raise Rates This Summer? It's Iffy

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


What a difference a week makes. Two weeks ago the odds were heavily against the Federal Reserve raising interest rates before September. Now it seems the market consensus believes the Fed will raise rates before the end of the summer, either at its June or July meeting (there is no meeting in August). I for one am still not convinced.

While I think the Fed certainly should raise rates at its next meeting – but then I thought they should have begun tightening monetary policy two years ago – I still don’t think it has the cojones to do so, despite some recent comments to the contrary. I also think politics will play a bigger role in a rate decision than many market observers believe. Indeed, I haven’t heard many of them bringing up that point. More on that in a minute.

What changed market opinion? Continue reading "Will The Fed Raise Rates This Summer? It's Iffy"

Their Greece, And Now Ours

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


"You mean, you were serious?"

You can just hear Greek Prime Minister Alexis Tsipras asking the European Central Bank that question after the ECB called his bluff and refused to advance Greek banks any more emergency funds, forcing them to close for at least a week and the Athens stock market to also suspend trading. Needless to say, Greece will default on a $1.7 billion debt payment to the International Monetary Fund that comes due June 30.

Until the ECB finally learned how to say No (or, in this case, Nein) over the weekend, Tsipras was confident that his following the J. Paul Getty school of financial negotiating ("If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem") would work and that the ECB and its fellow official creditors to Greece would eventually knuckle under to his anti-austerity demands and continue to kick the can down the road yet again. Continue reading "Their Greece, And Now Ours"