Author: George Yacik

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

Posted on by George Yacik

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" →

Slip Slidin' Away

Posted on by George Yacik

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


The Federal Reserve's interest rate liftoff schedule for this year is slowly but surely slip slidin' away, like a space launch aborted by bad weather. It makes you wonder which government agency is directing U.S. monetary policy, the Fed or NASA.

The minutes of the Fed's June 16-17 monetary policy committee meeting released July 8 were a lot more dovish than the announcement that immediately followed the meeting. It now looks like a September rate liftoff isn't as baked in the cake as many previously believed just a few weeks ago.

Since then, of course, a lot has changed, almost all of it conspiring against an early rate increase. September is a lot less likely to happen now, and even December looks doubtful. I didn't think the Fed was courageous or confident enough to make a move this year anyway, so the events of the past few weeks make me more comfortable with that position. Continue reading "Slip Slidin' Away" →

Time For Europe To Cut Its Losses

Posted on by George Yacik

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


One of the most exasperating novels I've ever read is Of Human Bondage by W. Somerset Maugham. The "hero" of the novel, Philip Carey, is hopelessly infatuated with Mildred Rogers, an unattractive, sickly, boorish shop girl several social rungs lower than himself. She takes horrible advantage of the good-natured generosity and sincerity of Carey, who time after time bails Mildred out of one self-created problem after another, only to be kicked in the pants (figuratively, of course) for his trouble and good intentions. And yet he continually comes back for more.

While you're reading the book (or watching one of the movies based on it), you keep asking yourself: When the heck is Carey ever going to wake up and smell the coffee?

Does this sound like any current European crisis you may have read about recently in the financial media? Continue reading "Time For Europe To Cut Its Losses" →

Their Greece, And Now Ours

Posted on by George Yacik

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" →

I'm Still Not Sold On A 2015 Rate Increase

Posted on by George Yacik

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


The consensus market opinion after last week's Federal Reserve monetary policy meeting is that the Fed will start to raise short-term interest rates sometime this year, maybe twice, beginning most likely at its September meeting.

I, for one, am still not sold that that will happen.

Last Wednesday's announcement following the Federal Open Market Committee meeting said not much of anything, especially when it came to signaling when it might finally begin interest rate lift-off. The statement gave the usual yadda yadda that economic activity "has been expanding moderately" and that "the pace of job gains picked up." But nothing about rates, other than the usual verbiage that the current federal funds target range of zero to 0.25% "remains appropriate."

Instead, analysts, journalists and investors were forced to look for clues in the "Fed dots," which show graphically where the 17 individual FOMC members expect interest rates to be by the end of this year, next year, 2017 and beyond. Continue reading "I'm Still Not Sold On A 2015 Rate Increase" →