Has Yellen Become A Dove Again?

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


Janet Yellen’s equivocal remarks at last week’s semi-annual Congressional testimony certainly might make you believe that a rate hike at the Federal Reserve’s July 25-26 meeting is hardly a sure thing. Indeed, the odds of that happening are a lot less than 50-50. A lot less.

In her testimony, Yellen remained confident in her previous declarations that inflation would gradually rise to the Fed’s 2% target. “It’s premature to reach the judgment that we’re not on the path to 2% inflation over the next couple of years,” she said. But then she quickly hedged her bets. “We’re watching this very closely and stand ready to adjust our policy if it appears that the inflation undershoot will be persistent,” she said.

Based on the past several months’ worth of inflation statistics, one would have a tough time arguing that lower-than-expected inflation hasn’t become “persistent.” Last month’s consumer price index was unchanged from May and up only 1.6% versus a year earlier, the fourth straight decline by that measurement. That followed May’s personal-consumption expenditures index, the Fed’s preferred inflation measure, which fell 0.1%. The core index, which excludes food and energy, rose 0.1%, but just 1.4% on a year-to-year basis, well below the Fed’s target rate and lower than at the beginning of the year. Continue reading "Has Yellen Become A Dove Again?"

Should We Believe The 'Transitory' Story?

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


The bond market may have stopped listening to the Federal Reserve, but that doesn't mean we shouldn't know what the voting members of its monetary policy committee are thinking. What's clear is that they're not as united as they were at their last meeting just two weeks ago, when they voted nearly unanimously to raise interest rates by 25 basis points, with only Minneapolis Fed President Neel Kashkari voting against.

Now, no sooner was the vote cast, but it appears that it at least one member, maybe two, have misgivings about voting for the increase. At the very least, they're not as much in a hurry to raise rates again soon, if not until the end of this year, if not even later.

Still, as you would expect – or hope for – in a body of intelligent people, there's a strong difference of opinion on what the Fed should do next as it concerns interest rates. Continue reading "Should We Believe The 'Transitory' Story?"

So You Still Think The Fed Doesn't Need Oversight?

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


After this latest episode involving the disgraced Federal Reserve Bank of Richmond President Jeffrey Lacker, who resigned for being less than truthful in the Fed’s probe of a leak to an analyst five years ago, are there still some people – outside the Fed, that is – who still believe the central bank is above the law and shouldn’t have to answer to Congress?

If you haven’t heard by now, Lacker – who was slated to resign later this year anyway – suddenly stepped down as the head of the Richmond Fed after he admitted to speaking to an analyst at Medley Global Advisors in 2012 the day before it published a report that contained confidential information about Fed policy discussions. You might remember that the leak, when it first came to light several years ago, “sparked a criminal investigation, prompted outrage on Capitol Hill and deeply embarrassed the Fed,” as the Wall Street Journal reported. Continue reading "So You Still Think The Fed Doesn't Need Oversight?"

So The Fed Raised Rates: Why Is the Market Acting Surprised?

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


It never ceases to amaze me how some people still react to and hang on to the words of former authoritative figures long after they’ve ceased to be relevant.

The other day 76-year-old Martin Sheen – Charlie’s father, for those under 40 – led a group of liberal has-beens and C-list “celebrities” urging Republican members of the Electoral College not to authenticate Donald Trump’s election. Does Sheen really believe people still care about what he thinks, if they ever did? Guess so.

While I admit that Janet Yellen and the other members of the Federal Reserve have hardly reached Martin Sheen status as irrelevant, I have to wonder about the market’s reaction to Wednesday’s decision by the Fed to raise interest rates an entire quarter point. Why did anyone care? Continue reading "So The Fed Raised Rates: Why Is the Market Acting Surprised?"

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

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?"