Fed Raises Interest Rate a Quarter Point – Nothing Changes…

It’s really interesting to read the financial presentation of Reuters in their article outlining the Fed, Chair Janet Yellen, decision to raise interest rates a quarter point (.25).  Keep in mind that Reuters traditionally slants left (globally) on all economic presentations.

Those Treepers who have followed our economic analysis will note the disparity between Yellen’s justification and the inconsequential impact therein.   The Stock Market never even flinched today.  Part of the reason is the disconnected (traditional) view of economics within the current Yellen justifications.  It ain’t just us who sees this “new dimension“.

Emphasis in citations are all mine.

(Reuters) The U.S. Federal Reserve raised interest rates on Wednesday for the second time in three months, a move spurred by steady economic growth, strong job gains and confidence that inflation is rising to the central bank’s target.

The decision to lift the target overnight interest rate by 25 basis points to a range of 0.75 percent to 1.00 percent marked one of the Fed’s most convincing steps yet in the effort to return monetary policy to a more normal footing.

{define “normal”}

However, the Fed’s policy-setting committee did not flag any plan to accelerate the pace of monetary tightening. Although inflation is “close” to the Fed’s 2 percent target, it noted that goal was “symmetric,” indicating a possible willingness to allow prices to rise at a slightly faster pace.

{code-speak for: we don’t anticipate our efforts having any impact.}

Further rate increases would only be “gradual,” the Fed said in its policy statement, with officials sticking to their outlook for two more rate hikes this year and three more in 2018. The Fed lifted rates once in 2016.

Business investment “appears to have firmed somewhat,” the Fed said in language that reflected a stronger sense of the economy’s momentum.

{appears to?  LOL. grumpy spinners gotta spin}

Fresh economic forecasts released with the statement showed little change from those of the December policy meeting and gave little indication the Fed has a clear view of how the policies of Donald Trump’s administration may impact the economy in 2017 and beyond.

{insert fed political policy operatives gritting teeth and shouting “curse you villain” as they ignore all current economic measures showing intense change.  Changes the financial markets have already noted and predicted upon}

[…]  The Fed’s projections showed the economy growing by 2.1 percent in 2017, unchanged from the December forecast. The median estimate of the long-run interest rate, where monetary policy would be judged as having a neutral effect on the economy, held steady at 3.0 percent.

{¹everyone other than the fed can see -and measure- substantially larger economic expansion.  ²Additionally the fed is saying nothing they do with interest rates will have any economic effect because large MACO growth (production expansion/GDP) is increasing at essentially the same rate as smaller MICO impacts (measured inflation).}

The unemployment rate Fed officials expect by the end of the year was unchanged at 4.5 percent, while core inflation was seen as slightly higher at 1.9 percent versus the previous 1.8 percent forecast.  (read more)

This last paragraph is a little funny.  The economy continues to add more jobs than the percentage unemployment rate measures can assign.  Meaning, people are gaining jobs who were not considered “unemployed”…. ergo, the unemployment rate cannot necessarily change – because the employees now working were never counted as not working.   This is a bit funny.

She, or really ‘they’, have no idea what’s going on with “core inflation” because the measured units don’t count the high consumables (energy, fuel or food).  They’re only measuring materials, durables and housing.

If you remember what we said was going to happen with durables and housing, you can see why the Fed is stuck measuring inflation as minimal, yet WAGES are now going up.

Wages are going up, by a factor twice the claimed inflation rate of Yellen, because inflation is increasing – but the fed doesn’t measure high-turnover consumables (food, energy, fuel) in their inflation stats.  See the disconnect?

These admissions, while subtle and often only noted between the words, are more evidence this new 2017 economic dimension is real; and more importantly, the predictions that come from within this new economic dimension will eventually prove accurate.

The two economic engines (Wall Street and Main Street), each fueled by differing policy, are too far apart for DC Monetary Policy to have any substantial impact.    It is going to take at least two fiscal years before the engines are close enough to have a cause and effect relationship.

Mrs. Yellen can keep on minimally raising interest rates (at least for a year) and the economy will flick it off like a flea falling into a furnace.

The New Dimension Explained

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52 Responses to Fed Raises Interest Rate a Quarter Point – Nothing Changes…

  1. Kill the central bankster “federal reserve” fiat currency manipulation once and for all. This is where the beginning of our downfall started.

    Like if you agree, or rail if you don’t. 😉

    Liked by 17 people

    • SteveInCO says:

      Don’t know if it began our downfall…but there’s no doubt it has contributed!

      Liked by 3 people

    • Chillin says:

      A great book about how and why the fed res was created is The Creature from Jeckal Island. It is really eye opening.

      Liked by 4 people

    • Mike King says:

      Until hard prison time comes nothing will change !

      Liked by 1 person

    • Get us the hell off of banker-monopolized digital fiat. Until the central bank is abolished we will only be able to staunch the bleed-out of our nation, we won’t be able to fully recover.

      That’s how the current monetary system works when the bankers demand principal + interest when they create money by making loans. The banks only create the loan principal. The interest can only be had by further indebtedness. Meaning the bankers and their cronies get extraordinarily wealthy while doing no work (create money with no effort, yet demand interest) they extract wealth surreptitiously from the productive public who is effectively enslaved (massive indebtedness) and in the end the whole system is designed to fail (when loan creation stops and reverses), plunging the entire nation into abject poverty.

      Liked by 2 people

      • TheLastDemocrat says:

        GuerillaPatriot – really?
        we have had untold billions of wealth creation by these lending practices. The only way that everything “crashes” is when a bunch of loan holders fail to pay all at once.

        Like the housing market crash.

        Generally, loans are either fairly well lent, or not. If there is a big opportunity for many lenders to make the same bad loans, then we have trouble.

        Fiat currency: A non-issue. I fail to hear anyone give a clear explanation of what is wrong with fiat currency.

        Bankers earning money for doing nothing: that is at least spin, and is really ignorance.
        Bankers commodify productivity and lower transaction cost for using wealth in one form in one place to be used as capital in a new endeavor elsewhere.

        This is part and parcel of capitalism. Wealth is storing up productivity. Capitalism is putting that wealth to work, rather than “But he who had received the one talent went and dug in the ground and hid his master’s money.”

        Liked by 1 person

  2. Sentient says:

    Word is that the Fed is going to sort of continue its quantitative easing. When they were doing QE1, 2 & 3, they created money from air to buy mortgage-backed securities (and Treasury notes). Theoretically, that created money was supposed to eventually be “uncreated” (Fed balance sheet shrunken). To the surprise of only the credulous, as mortgages are being paid off (properties sold or refinanced), the Fed is not going to uncreate money in an amount equal to the mortgage payoffs; they’re going to use those prepayments to buy more mortgage-backed securities. So while they’re raising short-term rates, they’re doing what they can to keep mortgage rates low.

    Liked by 1 person

  3. SteveInCO says:

    If the market expected a quarter point hike, it will have already figured it in (known as “discounting” the expected move) and prices will already have adjusted in the recent past to account for the expected move…hence there’s no obviously impact when it happens. It’s when they are surprised that you will see a jump or drop in prices. (And of course if you know something’s about to happen and others don’t…that’s “insider information.”)

    Liked by 1 person

  4. Albertus Magnus says:

    Don’t know where this should go so I will post it here.

    Now this is what you call draining the swamp!

    https://www.thecaribbeanradio.com/commentary-the-real-reason-new-york-us-attorney-preet-bharara-was-asked-to-resign/

    Liked by 5 people

  5. paulgilpin says:

    when are they gonna fire this guy from the fed?

    Liked by 1 person

  6. Rip Tide says:

    So bonds and bond funds should be Ok as long as interest rates rise slowly. Everyone should ask their advisors what their strategy is for rising interest rates, the duration of their fixed income portfolios, the dividend yields you are receiving, and what kind of currency risk you might have with your investments.
    Be very careful with long-term bonds treepers. Their prices have an inverse relationship with interest rates.
    Best wishes for great returns going forward everyone!!

    Liked by 1 person

    • Eileen says:

      The one thing I noticed which was different from other rate adjustments either up or down is that the equity markets and paper gold (futures) moved in the same direction. The fact that the markets hardly flinched suggests that institutional traders already factored in the rate hike to their buy / sell prices. For the last two days, the volatility was low; late in the day, it picked up, providing price movements for good opportunities to get in.

      Like

  7. Pam says:

    “Mrs. Yellen can keep on minimally raising interest rates (at least for a year) and the economy will flick it off like a flea falling into a furnace.”

    Love that particular sentence Sundance. So true. haha

    Liked by 9 people

  8. Wavetheshales says:

    Old Yellen.

    No new tricks.

    Just tricks…..

    Liked by 1 person

  9. jakegr says:

    Slightly rising interest rates now are actually good, IMO.

    Money is going to come pouring back into this country when economic nationalism really hits full tilt. More cash circulating means inflation. You don’t see it yet, obviously. But you may in the future.

    Small ticks up in the interest rate now can save us some pain later.

    A very, very rare moment when I get to say I agree with something the FED did.

    Liked by 1 person

  10. jsal says:

    The Federal Reserve is neither Federal nor a reserve.
    It needs to be shrunk drastically now, start by shutting down the Board of Governors in Washington DC.

    Liked by 3 people

  11. Great read. Hopefully interest/savings rates will get back to historical norms – 2-5% – within the first term. Savers have been crushed over the last decade.

    Liked by 2 people

    • Zeej says:

      For the life of me I can’t figure out why trump became a cheerleader of this market that is built on ZIRP, QE, insane deficits, and an absolute disgrace representation of accounting standards – FASB mark to market rules – post financial crisis.

      I’m loading up on long duration treasuries.

      Everyone I know working on the street especially the big private equity firms are selling assets. Foreign capital and retail (trump cheerleaders) capital is flying in and we have immense deflationary pressure bearing down on our economy due to the monetary excesses that has created insane amounts of excess capacity globally.

      Also the trend to passive investment indexing is new age socialism – it’s designed to control the channels which capital moves through and where it ends up.

      When markets are euphoric as they are now things do not tend to end well.

      We need a repricing of assets so the working class and middle income, particularly the millineals, can buy in.

      We have made an absolute mockery of our Nations system of credit and we need major reforms – I.e glass stegall, new corporate accounting standards.

      Be cautious people trump can only control so much and clearly he is opposed by many people in high places. Don’t be too fearful of fixed income investments, debt dynamics and demographics will keep rates low for much longer than most expect.

      I expect new lows on 30yr bond yields in next 12 to 18 months, and that’s when I expect trump infrastructure to get the green light and be financed with even longer duration bonds 50yr and 100yr maturities that pension funds will be forced to load up on.

      Liked by 1 person

  12. CJ says:

    The Fed should be limited to financial institution oversight. It’s role to manipulate the interest rates and money supply needs to be taken away. All financial rules and regulations should be the responsibility of the Fed and not the US government. This may help reduce the lobbying influence of the financial industry.

    Like

  13. TrustyHaste says:

    I appreciate the reality explanations under each segment. Very entertaining, too!

    I love this site! I learn so much more here than at the University I attended years ago. The research, the comments, the footnotes (within the site and in the other trusted resources.) Thank you!

    Liked by 2 people

  14. CJ says:

    The Fed should be limited to financial institution over site only.

    Like

  15. Rip Tide says:

    Another thing that will help our economy and growth rate is if the velocity of money increases. The banks are still sitting on much of the money that the Fed created. As that gets more readily into the system we will grow much faster IMO.

    Like

  16. kltk1 says:

    Help me understand. Won’t raising interest rates keep real estate prices down? And couldn’t this be somewhat of a negative to the economy as it would make mortgages cost more to purchase?

    I might be wrong about this so excuse me if I am. I thought I read commentary from Sundance indicating that with the economy recovering under President Trump, real estate prices would continue to fall. How’s that possible if the economy is getting better? Wouldn’t that be a good thing for the real estate market and cause prices to rise?

    Like

  17. alegenoa says:

    “the fed doesn’t measure high-turnover consumables (food, energy, fuel) in their inflation stats”… here I’m lost. They don’t? How? Why? …Hippo!

    Like

    • The Fighting Man says:

      They obviously don’t have to keep to a strict budget. As a working stiff, the FED’s haughty, privileged sneering is enraging. I can safely say we are in a world of inflation right now. How? Bought groceries recently? The FED might not use groceries as a measure of inflation, but I do. I budget every penny I make and I have had to start reshuffling priorities to keep food in the house. The FED must go. Privileged, arrogant jackwagons!

      Like

      • alegenoa says:

        Ok, maybe now I get it. It’s not that they aren’t measuring inflation for groceries per se, but the stats are made through a fine game of balancing lots of items’ prices… Some mass produced goods, especially electronics or imports from China and the like, are actually becoming cheaper; therefore a significant inflation in groceries isn’t that visible. I guess Sundance described this phenomenon a couple of times.

        Like

    • dayallaxeded says:

      They don’t include basic consumables in the inflation figures, b/c if they had been honest over the last few decades about the true rates of inflation and the erosion of American citizens’ earning/buying power, there would likely have been a YUGE purging of federal government.

      Too bad the Reagan years didn’t seque directly into 8 years of Mr. Trump, then 8 years of, maybe, Mr. Bannon (shiite, even Bob or Elizabeth Dole would’ve been better than anything we’ve seen between Reagan and DJT–GOP really missed a world-class opportunity not running Liz Dole for the 1st Woman Prezzy evah!), then 8 years of another competent patriot, etc. etc., instead of the string of bozos and grifters who’ve been substituting “bread and circuses” for governance.

      Also, with a little honesty from the feds (not just the Fed), we’d have known our reps and sens weren’t doing their proper jobs either and could’ve cleared the swamp ourselves and developed a nice, deep bench for future administrations.

      Like

  18. The Ghost formerly known as Prince says:

    The Fed raising interest rates is evidence that as the economy strengthens in the post-Obama era the artificially low rates are no longer necessary to prop up the bubble economy.

    The rates were never “real” they were a crutch, robbing savers to subsidize investors.

    Like

    • Chuck says:

      ^^^^^ This
      its disappointing that their aren’t hundreds of comments on this topic. The fed’s manipulation of money and interest rates are what kept the stock markets looking good whilst the economy actually sucked the last 8 or 9 years.
      ALL of the current board were appointed since 2009, 3 of them while Harry Reid ran the Senate and O was president. Think about that for a minute. All the main players at the Fed were put there by a man who hates our country.

      Like

  19. gwsjr425 says:

    Weird how interest rates were never raised during the Obama years even though we were being told how great the economy was. Record new jobs….low U/E rate blah blah blah.

    Its almost as if the Fed is now trying to put a break on the economy. Wonder what changed?

    Like

  20. Beenthere says:

    Skim through this article: http://www.zerohedge.com/news/2017-03-15/startled-reporter-asks-why-yellen-hiked-gdp-and-real-wages-sliding-here-response

    It shows the disconnect Mother & the Fed have with Main St & Wall St.

    Like

  21. GREENMIRROR says:

    Amazing 2017 and still a private company controls the medium of trade currency used by the greatest country in the world…unconstitutional for more than a century!

    Like

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