They should be fearing NEGATIVE INTEREST RATES because it's coming.... If you noticed back in late 2015 when they raised rates by a huge .25 they were going to raise in the March meeting but a downward stock market in early 2016 had them ease back a bit to hold off until June...I didn't know the stock market had such an influence on fed decisions hahahaha....all the market has to do between now and June is drop back down about 7% and the June hike will be off the table..take a 10% correction and no interest rate hike until the 3rd quarter and a full blown bear market and rates will actually be back to 0% and most likely NEGATIVE.. So remember the fed decides each rate move on where stock markets go...the old fed from 25+ years ago didn't care what the markets did...they did what they had to do..this new fed bows to wallstreet and their bank buddies... http://www.cnbc.com/2016/03/15/wall-street-fears-nirp-cnbc-fed-survey.html
I pretty much agree with everything you said here.. but don't underestimate one more rate hike. Surprise moves aren't all that uncommon
BOJ came out today and pretty much said they made a mistake in lowering rates to negative. I'm sure the Fed has been watching and also realise that neg interest rates are a bad idea.
Wait wait so if the BOJ said that how about instead of waiting at their next meeting to raise them why not just fix it tonight...raise the rates now if they realize they made a mistake... And the ECB just had another party last week with not only further lowering their rates into NEGATIVE territory but also pumping more money into their monthly program to the tune I believe to be $22 billion a MONTH....
The fed is done surprising...if they were real and didn't care about market moves rates would be back to 4.5-5% today...they have zero buffer room left with rates being at a pathetic .25%
The main problem with neg interest rates is the effect it has on banks. The ecb last week countered their cut on interest rates with further measures (targeted longer term refinancing operations)
Would you consider a rate increase tomorrow or June to be a surprise? I think they probably will raise it one more time in fact. Not sure if it will be tomorrow. They will probably keep it the same. But...They have been saying for some time now that the labor market is improving and things are getting better. What if they stick to that narrative and say things are getting better, and try to boost the market by increasing interest rates because they are so "confident" because the market rebounded hard since the beginning of this year and commodities are going up? That wouldn't be a "surprise" to me. Either way, I will not be surprised because I know that the market is at a critical juncture and things can go either way. But it will "surprise" the markets. Just be very cautious.
The Fed doesn't need to jawbone NIRP right now since the S&P 500 is back at what they deem "fair value" 2000 area...When it's at 1800, the NIRP rhetoric picks up and Bullard or someone else will embark on "open mouth operations"...We've seen this game played so often now, it shouldn't be a surprise any longer.