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Hike It And Like It
Lots of folks are throwing roses at Janet Yellen for her rate-hiking performance yesterday. They pulled it off without a hitch. Like the Ocean’s Eleven heist—everything had to go right, and it did.
Stocks rallied hard, FX had it fully priced in, and the only thing that was down was oil. Even the junk bond market caught a break. You couldn’t have scripted a better ending.
Except this isn’t the ending, but the beginning.
Also, I’d like to reiterate that the Fed has been screwing around with this for over a year, to get the market used to the idea of a 25bp rate hike. I don’t call it a success when you need a year of jawboning to raise rates a quarter-point. I call that hopelessly inept.
Anyhow, I think the takeaway for investors here is how hawkish the Fed is and how rates might go higher, faster than we thought. Many people thought the directive was dovish. I didn’t think so at all.
- The Fed talks a lot about labor utilization slack being taken up—that’s code for “If the unemployment rate goes down any more, we are going to look stupid for not having hiked rates.”
- The Fed seems confident that inflation will rise to 2%. Why, I’m not sure.
- The whole directive has a hawkish tone.
- The Fed emphasizes that rate hikes will be “gradual,” but it’s still targeting 1.4% fed funds at the end of 2016, which would entail 3-4 rate hikes next year.
- The Fed doesn’t seem to be at all concerned that it’s an election year.
The post Hike It And Like It appeared first on Silver For The People.
Source: http://silveristhenew.com/2015/12/17/hike-it-and-like-it/
