atans1

Fed to market: “Go ahead, make my day”

In Currencies on 30/08/2016 at 3:05 pm

The Fed is itching to pull the trigger like Dirty Harry was ready to use .44 Magnum revolver

NYT Dealbook reports:

 

The Case for an Interest Rate Increase
The Federal Reserve looks like it will probably raise rates in the coming months. “In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months,” said Janet L. Yellen, the Fed’s chairwoman, said after last week’s annual policy conference at Jackson Hole.
Although the Fed is likely to consider a move at the next meeting, in September, many expect action to come in December, after the presidential election.
Some officials remain nervous about fragile growth, and there are questions about how the Fed could combat downturns in the future. If interest rates are not raised as much as during other periods of growth, they cannot be cut as much during downturns. Officials also remain skeptical about using negative rates.
“Central banks still have arrows in their quiver [although] they may not be as effective as they were before the crisis,” Randall Kroszner, a former Fed governor,told The Financial Times. But, he pointed out, “central banks can’t simply create growth.”
Still, perhaps they will take the advice they received from Christopher A. Sims, a Nobel laureate in economic science. What is that? Stop. You’re making things worse.
Mr. Sims argues that central banks need to say publicly that more government spending is required to stimulate economies. “So long as the legislature thinks it has no role in this problem, nothing is going to get done,” he said.”
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