Will the Fed Decide Not to Raise Rates After All? By Randall W. Forsyth Nov. 16, 2018 7:59 p.m. ET Photograph by Liam Desic Trade and interest rates continue to dominate the direction of financial markets. Following the post-midterm-election pop, the S&P 500 shed nearly 4% in the five sessions through Wednesday. The Wilshire 5000, the broadest measure of the U.S. equity market, dropped by about the same percentage, meaning that $1.3 trillion of investors’ stock market wealth disappeared. Stocks pared their losses on Thursday and Friday, but the S&P 500 still finished down 1.6% on the week. Helping to turn the market around were signs that some senior Federal Reserve officials got the markets’ message about the possible dangers of moving too far, too fast with rate increases. President Donald Trump’s comments on Friday that China wanted a trade deal to stave off additional tariffs also gave the market a lift. One indication of lessening rate pressures was apparent in the Eurodollar futures market. During the post-midterms stock swoon, virtually an entire one-quarter-percentage-point rate boost previously priced in for late 2019 to early 2020 was priced out. That implies that the peaks in short-term rates could come sooner and be lower than what the equity market had feared. It also indicates that the four quarter-point hikes by 2019’s end implied by the Fed’s “dot plot” of rate projections might not all materialize. Fed Vice Chairman Richard Clarida said on Friday in a CNBC interview that the central bank’s key federal-funds rate target, currently 2% to 2.25%, is getting close to “neutral,” that elusive rate that neither boosts nor retards the economy. Back in October, Fed Chairman Jerome Powell roiled the global markets by saying that policy was far from neutral, which also raised the ire of Trump, who complained that the Fed was threatening the expansion. Last week, Powell acknowledged the risks posed by slowing growth abroad, the lagged effects of the central bank’s previous tightenings, and the waning impact of fiscal stimulus. Several weeks ago, this column was headlined “Why Trump May Be Right About the Fed.” In particular, the concern stated was that Powell & Co. didn’t know what the neutral fed-funds rate was, and so risked overshooting it. Inflation, moreover, wasn’t accelerating, but rather peaking, further lessening the imperative for higher rates. More Up & Down Wall Street The California Wildfires’ Financial Toll But another quarter-point hike still seems highly likely, if only not to give the appearance of buckling to pressure from the White House, although the probability has slid to 68.9% from 78.5% a month ago, according to the CME Fed Watch website. On Friday, Philadelphia Fed President Patrick Harker told The Wall Street Journal that he isn’t ready to support a December rate boost, with inflation not moving “rapidly past our target.” Another area of distress has been the corporate credit market, both for investment-grade and high-yield issuers. As our colleague Alexandra Scaggs writes, General Electric (ticker: GE) bonds are under stress, perhaps even more than the company’s stock, which took another leg down last week. While U.S. corporate debt has burgeoned, to $8 trillion by one bond pro’s estimation, the number of market makers has shrunk, worsening liquidity and price volatility. That’s another less favorable financial condition for the Fed to consider. Write to Randall W. Forsyth at randall.forsyth@barrons.com https://www.barrons.com/articles/will-the-fed-decide-not-to-raise-rates-after-all-1542416387
That will depend on whether James Powell and the rest of Fed governors are satisfied that the economy has been slowed down enough. If they feel that the economy is still too overheated then we would see more rate hikes. Some experts are saying that Powell might let the rate go upcoming Dec. but might raise it again next year but don't think the Fed is done with the rate hikes yet.
Yup data dependent. But Fed won't care to acknowledge key data is asset prices. If stocks and corp bonds continue to drop they will slam on the brakes of rate hikes.
Trump is right... about rate hikes "hurting things as they've been". (Trumpy laments, "Obama had zero interest rates, why shouldn't I?". "Not fair to compare my administration to his". Well... Odumbo should NEVER have had such low rates for so long... and it did a TON of damage to the economy by exploding debt. (The pain of which has yet to be felt in spades, but it's coming.) However Powell recognizes that we can't go on with zero interest rates forever. At some point, the longer we try, the harder the fall when it comes. At some point there is going to be pain... a LOT of pain, regardless. It's much like an infection. Treat it early enough, it's not such a big deal. Let it go long enough and it becomes overwhelming and FATAL! Even if rate hikes crash the market and crash the economy back to 2009 levels... bad as that would be, the effects would be survivable and temporary. Let the debt bubble continue to balloon at zero interest rates... and the collapse may not be survivable in any way we could imagine at this time. I think Powell is on the right track... no matter how much the "zero interest rate little piggies" squeal... including Trump.
Right now the fed claims they will raise rates going forward into 2019, which they should,however the stock market dictate where fed funds go. Once stocks get destroyed even futhers and technicals break down the fed will be bowing to wallstreet once again.....don't let them fool you. Everyone knows the fed will halt fed fund rate increases if the markets fall into bear territory!!!
They will not only halt interest rate hikes but they will actually start cutting them ....come December meeting they will probably change their wording on further rate hikes into the new year.
Trump is comparing himself to Obama? LOL Obama inherited an economy ravaged by the economic crisis of 2008 that was in deeper recession than the Great Depression of 1930's. People lost their jobs and were staying in shelters because their homes were foreclosed. What could Obama do? Still forcing people and companies to pay double-digit interest rate to borrow? Trump has one of the strongest economy going for him and he's pouting? If the economy did go to the dogs, Trump has nobody to blame but himself. If he hadn't gone around and levied tariffs on everybody around the world and started a trading war with China on hundreds of billions of dollars of trade, we would still be having a bull market and Powell's rate hikes would be perfect to rein in the economy a little to prevent it from being overheated and reduce the ballooning debt.
%% Most likely; but DEC is a long way away, in %%.Maybe not long so much on calender; esepcially since IBKR printed 2018, in monthly halves....... Most all monthly calenders are printed in 7 day segments. NOT a prediction