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Plosser expects 300 basis point rate hike cycle

  • The Fed sees QE ending in October or November with rate hikes beginning in 2015, says Philadelphia Fed chief Charles Plosser, appearing on CNBC. His view is of a Fed Funds rate at "2-something" by the end of 2015 and 3% by the end of 2016. "My dot is 3% at the end of 2016."
  • He finds the market reaction to Yellen's press conference last week puzzling as the Fed did not change its policy position. In any case, he's more comfortable talking about economic conditions rather than dates.
  • ETFs: SHY, BIL, SHV, VGSH, SCHO, DTUL, SST, DTUS, TUZ
Comments (21)
  • bbro
    , contributor
    Comments (9317) | Send Message
     
    Eurodollar futures currently project a 3% funds rate in early 2018,,,,
    25 Mar, 07:58 AM Reply Like
  • Captain Pike
    , contributor
    Comments (506) | Send Message
     
    Like I said yesterday, raising rates is what the fed does to cool economic activity to TRY TO control inflation in previously normal times. We are no longer in "normal times" and we don't need to cool anything off. If anything we need a little more heat. These 2 guys don't seem to have the brains/knowledge to justify their positions, if they want rates at a particular point just for it's own sake.

     

    If somehow labor participation rates return to normal and the REAL unemployment rate drops below 5% then they can cool things off, but that is years of 300K/month job growth away.
    25 Mar, 08:08 AM Reply Like
  • IncomeYield
    , contributor
    Comments (1457) | Send Message
     
    How does that $10 hamburger taste? No inflation?

     

    The Fed needs to slow borrowing and speculating now -- both private and public. Bubbles everywhere since near zero interest rates for safe 'n sane savers.
    25 Mar, 10:54 AM Reply Like
  • starbuck89
    , contributor
    Comments (2) | Send Message
     
    Do you honestly see real unemployment returning to 5%? With technology and automation I do not believe we will ever return to the "normal employment" of the past.
    25 Mar, 11:10 AM Reply Like
  • genomegk
    , contributor
    Comments (439) | Send Message
     
    "Do you honestly see real unemployment returning to 5%?"

     

    Sure, all depends on how many boomers actually retire.
    25 Mar, 11:32 AM Reply Like
  • Tack
    , contributor
    Comments (12721) | Send Message
     
    s:

     

    Agree, and not the least of which because the increasing Government subsidies for not working have removed a large cadre of folks permanently from the workforce and, also, increased the length of supported time of the temporarily-unemployed group, thereby expanding its size.
    25 Mar, 11:33 AM Reply Like
  • Captain Pike
    , contributor
    Comments (506) | Send Message
     
    Exactly Starbuck, that's why said we are no longer in normal times. W/O new labor rules similar to France with 4 day work weeks or massive public works projects paid for by a productivity tax, I find it hard to imagine having enough work to reach full employment with all the new tech and automation.

     

    And that is why inflation fears are ridiculous.
    25 Mar, 11:47 AM Reply Like
  • Captain Pike
    , contributor
    Comments (506) | Send Message
     
    @ IY

     

    from yesterday's similar news story I said when asked if I go to the supermarket;

     

    Yes Fred, many times a week. I can still buy russet potatoes @ .35c/lb at Aldi, Pork @2.99 lb at Wally and on and on. Prices went up in 08/09/10 when oil had spiked but not since.

     

    If you choose to buy a full cart at Whole Foods, that's your fault.

     

    Seems to me you have expensive tastes IY.
    25 Mar, 11:50 AM Reply Like
  • yv204
    , contributor
    Comments (165) | Send Message
     
    What's with the magic 5% number? Even if one believes NAIRU exists, and that's a big if, the equilibrium rate would depend on a number of factors. In any case, people always talk about technology as if it's this magical thing that happens by itself in a vacuum. More technology means more jobs, but in different sectors of the economy. And no, these jobs haven't been all outsourced to India/China/Ireland/etc and yes, they pay more much more than the minimum wage.
    25 Mar, 12:13 PM Reply Like
  • 6684001
    , contributor
    Comments (33) | Send Message
     
    I agree with Captain, I have no expectation of inflation or economic growth that will make the Fed raise rates in 2015. The Fed is conically too optimistic, we are more likely to see them stop tapering at $25B a month due to deteriorating economy and/or market.
    25 Mar, 08:33 AM Reply Like
  • rebowley
    , contributor
    Comments (160) | Send Message
     
    Isn't it interesting that the FED never raises interest rates during an Election Cycle.

     

    I am for normalization of rates, honesty in inflation figures, an honest President, an efficient IRS without Political bias, balanced budget, and paying down debt slowly.

     

    It's pretty sick to know that Canada is more business friendly than the US. Makes me want to vomit.
    25 Mar, 08:41 AM Reply Like
  • fxdudeinmia
    , contributor
    Comments (491) | Send Message
     
    Plosser is yet another example of someone who still has a hangover from the high interest rates of the early 1980's, and then Greenspan's Fed fighting the ghost of inflation by raising overnite rates several times to 5%+. What Plosser doesn't realize is that low interest rates are a global phenomenon in the developed economic nations, and the high rates at times in the past 30 years were the anomaly. It's a good thing Plosser isn't Fed Chairman, because then we'd get unnecessary Fed-induced recessions or soft patches, like we had under Greenspan.

     

    Low rates are the norm, and Fed Funds should not get past 2% in the next cycle.
    25 Mar, 09:07 AM Reply Like
  • Tack
    , contributor
    Comments (12721) | Send Message
     
    Forecasting what rates will be next year or three years from now is a pointless and fruitless exercise. The Fed will raise rates if and when economic and inflationary forces dictate such action, not on any imagined fixed schedule.
    25 Mar, 10:06 AM Reply Like
  • Captain Pike
    , contributor
    Comments (506) | Send Message
     
    If these fed members had done their job's right they would have stood their ground on the down payment rule!

     

    Under The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 the Fed among other bank oversight institutions proposed down payment requirements of up to 20 percent for QRMs under the part of the risk retention requirements. Federal Reserve Board: Docket No. R-1411. They later caved to industry pressure and now banks are offering crap loans again.
    25 Mar, 10:08 AM Reply Like
  • june1234
    , contributor
    Comments (2497) | Send Message
     
    "Puzzling" this time, last may after bonds crashed they called it "overreaction". This past winter one of em, addressing a string of disappointing data said "his gut" told him otherwise. I try to remember these people are academics who neither invest, trade or run businesses for a living.
    25 Mar, 11:02 AM Reply Like
  • yv204
    , contributor
    Comments (165) | Send Message
     
    What's amusing is that we are getting all these doom and gloom comments with the top projected rate of 3%. I presume all readers keep in mind that the rate hikes will only come if the economy continues to do ok, unemployment rate continues to decline, and nothing outrageously disruptive happens in general. Really? Under these conditions you have difficulty imagining a 3% fed funds rate? Please.
    25 Mar, 12:17 PM Reply Like
  • Tack
    , contributor
    Comments (12721) | Send Message
     
    yv:

     

    I've come to the conclusion that many commenters must have been no older than five years of age when the 2008 meltdown occurred because they seem entirely devoid of conscious memories of how the economy and rates worked at anytime prior to that event.
    25 Mar, 12:20 PM Reply Like
  • june1234
    , contributor
    Comments (2497) | Send Message
     
    Other people remember 08 had nothing whatsoever to do with anyones or any countries economy or rates and those same people know the test will be when they actually do manage a 3 to 4% GDP till then more of the same.
    25 Mar, 12:40 PM Reply Like
  • William Edward
    , contributor
    Comments (65) | Send Message
     
    The thing which everybody is missing is that the world dominance of the US in the whole of the 20th century is a thing of the past. Russia doesn't care what any weak US President thinks. Neither does China. Our military prowess has supported our dollar far better than any central bank. As other nations assert themselves our once dominant position will shrink to parity at best. The dollar will fall in value relative to other currencies and the price of imports will skyrocket. That means that inflation will ravage our population without any rate increases at all. And both the Federal Reserve and the US government will be powerless to change anything. The only things we have going for us are abundant natural resources and lots of tillable land. Now if the Greens will just let us use them--Buy 15 acres and a hut!
    25 Mar, 12:55 PM Reply Like
  • Tack
    , contributor
    Comments (12721) | Send Message
     
    WE:

     

    Of course, you have it precisely backwards. If Russia and/or China become more militarily belligerent, fearful investors around the world will flock to the dollar, as always. What, they're going to flee toward the ruble or yuan? Good luck with that.
    25 Mar, 01:23 PM Reply Like
  • Roy Manning III
    , contributor
    Comments (62) | Send Message
     
    I'm invested in TBT which is a short bond fund. If they raise rates to 3% I could make a tidy profit. The fund is near lows so it could be a good deal if you're willing to wait a year or two. Good luck to all investors.
    25 Mar, 04:11 PM Reply Like
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