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How to Spot a FED Rate Hike . . . and Therefore the Next Recession

Posted on September 20, 2014

This article makes sense, but only if (1) the FED has a strategy for raising rates, and (2) this strategy will work. Don’t assume either one.

Market observers are parsing every comment from the Federal Reserve (Fed)’s most recent statement and Fed Chair Janet Yellen’s accompanying press conference, trying to determine where the Fed’s words fall on the “dovish” to “hawkish” spectrum.

If I had to weigh in on the debate, I’d say the September Federal Open Market Committee (FOMC) policy statement was “hawkish.” But more importantly than such nomenclature, I believe there were five signs in the statement that the anticipated pace of policy rate hikes is going to be quicker than markets have expected.

Toned down “dovish” phrases. While the September statement retained both “keyword phrases” that are interpreted as highly dovish (“maintain the current target range for the federal funds rate for a considerable time” and “significant underutilization of labor resources”), Fed Chair Yellen appeared to dilute the strength of the “considerable time” language in her press conference, implying that a “considerable time” could be a shorter time period than many expect.

Back in March, Chair Yellen, perhaps mistakenly, said that a “considerable time” was six months. Then, at her September press conference, she said “a considerable time” isn’t mechanical, shouldn’t be read explicitly in calendar terms, will be data dependent and could come sooner than many expect. In other words, it could be three months, or if data weaken, it could be 12 months. Given that current economic data are solid, as the Fed acknowledges (see more on that below), a “considerable time” is likely to be shorter rather than longer. In other words, to me, Chair Yellen’s comments go a long way toward weakening the Fed’s dovish language.

(For four more, click the link.)

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7 thoughts on “How to Spot a FED Rate Hike . . . and Therefore the Next Recession

  1. What do you mean "next recession", we're still in one, so it would be a "recession in a recession".

  2. Independent Voter says:

    If the election turns the Senate over to conservatives, then I predict the rate hike will begin shortly after.
    otherwise it will be delayed to the point that a conservative cabdidate for The White Houe in 2016 geta some real traction.

  3. Independent Voter says:

    Note that inflation and unemployment figures are distorted by what is and is not counted as such. So, yes we definitely are still in a depression. We are not supposed to be intelligent enough to figure that out, and indeed, the majority are not.

  4. The only real solution is to abolish the Fed and their collection agency the IRS.

  5. Conservatives aren't the problem, CONGRESSIONAL SPENDING and the BIGGEST SPENDER IN MODERN WORLD HISTORY, Benedict Osama Obama is! The FED has printed money, printed money and bought up DEBT because the world markets are NOT loaning any more money to the U.S.–our dollar has been de-valued under Obama, something his puppet Daddy George Soros is driving, it was Soros who said: "There will be a SLOW decline in the value of the dollar, a MANAGED decline."—Financial Times, October 23, 2009. That's given rise to a Russia/China global trade power and elimination of the U.S. dollar as the world's trade currency for many nations including Saudi Arabia who's no longer using the dollar for its petroleum exports/sales market. The "BRICS" nations, Brazil, Russia, India, China, South Africa…have all called for elimination of the dollar as the world's trade currency and introduction of a new system–something which Soros has long advocated. The International Monetary Fund and World Bank are also on board with the idea and it's not a matter IF it will happen, but WHEN. IF they choose to do so, that would END the Federal Reserve's ability to PRINT anymore "notes of credit" we've been led to believe are "U.S. dollars", it would also mean an END to printing money to sustain our government, pay any bills with, DEBT or interest on the DEBT,etc….it also means SKYROCKETING inflation, prices, cost of living–a taste of a WORSE depression than that of 1929.

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