“Fight Against Stupidity And Bureaucracy”
It has been nine years since the ‘Fed’ put up interest rates in the US. Not a day goes by when some pundit or other is explaining why an interest rate rise is imminent whilst yet another is warning that the US dollar is about to collapse in a heap.
There’s even a fed funds futures market for people to bet which way they think it is going to go.
For what it’s worth, I think the US dollar will weaken from its current position because a lot of the support it is getting lies solely in the belief that interest rates are about to start going up.
Much of that dollar support is created by continual talk from Yellen and the Fed about raising rates. But the fact is that every time they reach the point at which they said interest rates would rise, they chicken out.
So why does the Fed keep making big promises that it hasn’t the nerve to keep?
Good question, I’m glad you asked.
Although it might make them look a bit foolish, what their continual rate rise threats also do is to help to discourage speculation in US stocks and bonds – not a healthy thing for any economy.
If they do, do it, I don’t think they will until very late in 2015 – maybe not until 2016.
2016 is an election year.
Will Obama deliberately burst Hilary’s Democrat Party bubble by allowing interest rates to rise? He might do it out of spite I suppose. There’s no love lost between them since Obama beat her for the candidacy and then won the Presidential election eight years ago.
But I think the election year may mean we are looking at 2017 for those rate hikes.
So who is right, me and people who think like me or the great unwashed of the media who are still predicting an imminent rate hike.
I wouldn’t bet the farm on it, but I think I might risk a few zero interest dollars that they are wrong and I’m not.
Stay tuned for some gloating or a big spoonful of humble pie come June this year.