On Nov. 4, Federal Reserve Chairman Janet Yellen spoke before Congress on financial issues such as the state of the economy, interest rates, and monetary policy. And during her hearing on the floor of the House, Yellen offered up a counter opinion to what was stated last month during the Fed’s most recent FOMC meeting where the central bank hinted strongly at raising rates as early as December, and instead spoke of the possibility of negative interest rates should the economy move in a worse direction.
Two opposing statements within a few short weeks… it certainly appears that Nomi Prins was correct when she states that the Fed has no idea what it is doing.
As the market now diligently calculates the suddenly surging odds of a December rate hike, here’s Yellen with a preview of what will happen once the rate hike cycle is aborted…
- YELLEN SAYS IF OUTLOOK WORSENED FED MIGHT WEIGH NEGATIVE RATES
- YELLEN SAYS NEGATIVE RATES COULD HELP ENCOURAGE BANKS TO LEND
… just as it was aborted in Japan in August of 2000 when the BOJ also decided to send a signal how much stronger the economy is by hiking 25 bps, only to cut 7 months later and to proceed to monetize not only all net Japanese debt issuance a decade later, but to hold half of all equity ETFs. – Zerohedge
Economic indicators have long shot through the Fed’s prior benchmarks of low unemployment, and ‘economic recovery’, and have been simply waiting for inflation to rise to finally pull the trigger on rates after nine long years. But just as most analysts failed to call the September non-rate hike decision, it appears that the central bank may once again cause chaos to the markets through their inability to provide concise direction on what they plan to do in a little more than a month.
Most economists in the alternative media believe that there is no way the Fed can or will raise rates, as the cost to derivatives and current debt loads that require ZIRP to sustain the status quo will kill any chance of an increase to the Fed’s benchmark. But like the ECB’s Mario Draghi, Western central banks have dug themselves too great a hole to do anything more than to carry interest rates negative, and even increase quantitative easing programs.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com, Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.