What will the FED Do Next?

[laurence]

I'm thinking a .25 raise and language that says "we're pausing" in clear terms. Market rallies because, "It's over" and Bernake gets to trade in his dove wings for hawk's.

 

[mathjak107]

.25 raise...historically the fed has never stopped raising rates with un-emloyment so low,,corporate profits so high and the markets holding up fairly well so far

 

[IHateCNBC]

.25 raise...historically the fed has never stopped raising rates with un-emloyment so low,,corporate profits so high and the markets holding up fairly well so far

Not to mention core inflation at an 11 year high, crude at $76 and gold at $650.

If the Fed pauses they will lose all credibility.   

Hence, I say again - they painted themselves into a box.   :

This .25 drip drip thing was a bad idea.

 

[wabmester]

historically the fed has never stopped raising rates with un-emloyment so low,,corporate profits so high and the markets holding up fairly well so far

On the other hand, GDP growth was 2.5%. Historically, the fed has never continued to tighten with 2 consecutive quarters of GDP growth < 3%.

The economy has slowed considerably. Housing has cooled glacially. The fed fears that if they raise again, they'll be setting us up for a hard landing.

 

[laurence]

I thought they always overcorrected! We will see. I admit my prediction may be tainted by personal desire (my mortgage is fixed, my emigrantdirect account keeps going up and up and up...)

 

[Mwsinron]

Well frankly Id like to see them back down to 1 percent Booming equities makes more money than 6% money markets.

 

[IHateCNBC]

USD index went under 85 today that means crude price goes up and that means our trade deficit goes up.

Fed should go .50%.

IMHO.

 

[Mwsinron]

USD index went under 85 today that means crude price goes up and that means our trade deficit goes up. 

Fed should go .50%. 

IMHO.    

Hindsight being 20/20 last bump should have been .5 %

 

[IHateCNBC]

Hindsight being 20/20 last bump should have been .5 %

Yeah the .25 and 38 fed is done rallies did not work for me either.

What a joke.

Good thing the fed is transparent to the markets. : Just like their charter says.

 

[brewer12345]

USD index went under 85 today that means crude price goes up and that means our trade deficit goes up. 

Fed should go .50%. 

IMHO.    

I don't imagine the Fed is terribly eager to see China float the yuan. Talk about a recipe for US inflation!

The 1/4 point at a time game is not without its problems, but this is really a case of "pick your poison". I definately did not want to go through a replay of 1994. Just about killed the bond market and blew up a number of financial institutions that got caught with their pants down in the carry trade.

 

[IHateCNBC]

I don't imagine the Fed is terribly eager to see China float the yuan.  Talk about a recipe for US inflation!

The 1/4 point at a time game is not without its problems, but this is really a case of "pick your poison".  I definately did not want to go through a replay of 1994.  Just about killed the bond market and blew up a number of financial institutions that got caught with their pants down in the carry trade.

We may have a replay of 1987.   

Yield curve is horrible a massive 10 year and 30 year treasury auction next week that will not go well.

Heck my money market yields more then a 30 year treasury right now.

Not the sign of a health economy.   

 

[brewer12345]

Don't forget that there is a lot of tightening that hasn't made an impact yet. It takes 6 to 18 months for the full effect of a rate increase to be felt...

 

[IHateCNBC]

Don't forget that there is a lot of tightening that hasn't made an impact yet.  It takes 6 to 18 months for the full effect of a rate increase to be felt...

Money poured into the municiple bond funds today. Normally the sign right before a big down turn in stocks.

20 year AAA dropped 20 basis points in yield. Wow.

2 year AAA dropped 10 basis points.

We shall see.

 

[IHateCNBC]

Australia raised rates two days ago and ECB raises last night.

Meaning. Fed needs to raise rates to be competitive to help the Treasury sell debt products.

 

[Mwsinron]

Low job numbers today might mean a pause. Of course personal income was up a bit. Maybe they will crank another .25 to let everyone know whos boss

 

[wabmester]

The fed funds future market is probably the best predictor of what the fed will do. Right now, pause is ahead by a nose.

You can watch the action here:

fed funds predictor

 

[audreyh1]

How do we read those graphs?

High probability that the Fed will pause in Aug, but raise 0.25 point in September?

Audrey

 

[wabmester]

How do we read those graphs?

They have different betting lines for the next rate: 5%, 5.25%, 5.5%, and 5.75%.

The market says about a 60% chance of it staying at 5.25% at the next meeting, and probabilties are about equal for 5.25% vs 5.5% in Sept.