The Federal Reserve seems likely to continue raising rates into the foreseeable future making it a likely candidate for the ire of President Trump. The irony is that the President’s own trade policies likely make the Fed take actions to increase rates.Continue reading Trade Policy, Fed Policy, and North Dakota
In what may be the most telegraphed monetary policy move in history the Federal Reserve raised rates today by 0.25% (here is an article). The great wailing and gnashing of teeth predicted by all the Chicken Littles seems not to have come to pass though. I have been saying this on JT’s show for the better part of a year now: If the economy is so fragile that a 0.25% increase in rates is a threat to economic growth than we have bigger issues.
This is something of a non-news item (article). Three Republicans on the banking committee supported her making it very likely there would be 60 votes for her in the Senate which would negate any procedural moves to delay her appointment. Fed policy is entering a transition period as extraordinary policy measures such as asset purchases are in line for phase out. The timing of these events is very important because, unfortunately, financial markets depend on these measures right now. Fed purchases are supporting prices and keeping yields low, impacting individual asset allocation decisions. When the interventions end we will see changes in yields, and therefore changes in those asset allocation decisions. As a result you will see increased volatility in financial markets, which matters for individual retirements, college savings and so on.
The grilling of Janet Yellen as the nominee to be the next Fed Chair is sure to raise some interesting fodder. I will comment as appropriate but I have a presentation on Friday so it may take some time for me to get the posts up. I will suggest the following though: the nomination of Yellen is a status quo pick. She is an insider and has been present through the QE policies and so understands the rationale behind current Fed policy. This makes here unlikely to undertake drastic immediate change. This is in contrast to a Summers nomination. Summers ego was likely to get in the way and he would need to change policy simply to put his stamp on events.