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What's Your Fed Rate Prediction?


ProTrader

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I keep predicting a rise and then you get poor NFP figures and low inflation figures.  I am more confident of a rise in December but again that is all dependant on the economic data between now and then.

 

I think there is a lot of hype about the anticipated rate rise.  On the grand scheme of things a small rise is insignificant but I expect a knee **** reaction across the markets especially the FTSE, DOW and of course the USD.

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So they left it unchanged last night as expected.

It would have been nice if they had given some certainty as to the next move i.e. before the end of the year 

 

They should have also made certain that everyone in the markets knows that they needn’t call a press conference to make a change in the o/n funding rate and that it can… and almost certainly will… come as a surprise when the data has forced them to act.

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I don't think they can be certain , because they just don't know, what's going to happen in the rest of the world. I think what was interesting was that they mentioned China and Europe, traditionally they do not mention international situations but at ths meeting they did. This gave a clue as to some of their thinking. Compound that with the fact they have forecasted inflation, and expect improvement in the labor market, but they still uncertain about the accuracy of those forecasts, because they just don't know what the future will bring. If they raise too early it could be worst than leaving it too late.

 

That's right  I think the appitiete for raising rates in December is fading, as 4 members actually said they want to raise rates next year, and one even wants negative interest rates!  To be honest, I think if inflation picks up, unemployment continues to do well, and China manages its economy well and Europe's infaltion picks up then they may raise rates by December 2015, but I think that's a lot of things to go in favor of the FED  in such a short space of time! I agree 2016 is more likely.

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They won't increase rates for ages ! There will be a shock to the system, numbers won't be as strong as they think etc. Not until the whole (western) world has inflated itself out of most of its debt. (Everything up) vs. (oil down) = 0% inflation, keep rates down. Inflated world, oil jumps up, rates rise and the world has paid off all its debt.

 

Those without assets think they're out of debt and better off, those with inflatable assets will be rubbing their hands together in their champagne bathtub - everyone is happy.

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Yes there is a debt bubble, where the western worlds debt is a lot higher than the pre 2008 level. This is, as you pointed out , the main reason they can't raise rates. Inflation needs to rise to at least 2% target, and Yellen went as far as to say that they predict that will happen in 2018! She also mentioned inflation at 2.5% and what that would look like. However, I only like to take a rolling 6 month forecast personally, because you don't know what will happen. The debt mountian needs to be degraded in value over time, which is an issue I keep in the back of my mind when analysing the markets. 

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Factors to watch are unemployment, inflation and China. Members of the central banks in the UK and US are talking for the need to cut rates to boost inflation. Although at least 1 member of each policy committee called for a raise.

 

Low inflation is good for some but the economy needs some inflation to grow. There needs to be a balance but I think we are a way off being at a level to raise yet.

 

Some argue that a raise is needed to bring certainty to the market. However when they do raise there will no doubt be further indecision as to the frequency of the raises.

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Thanks for your comment Protrader.

I agree it is very unusual to mention overseas when deciding on rates.

They have almost exclusively referred to issues at home and not abroad.

This I believe creates confusion and uncertainty which are never friends of the market.

I see the market struggling in the short term as a result and thus looking for the downtrend to continue.

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  • 4 weeks later...

I think this will carry on for years to come. Maybe 5 or 10 years+. When i was a kid at school we had Norman Lamont rase intrest rates to 10 % in the early 1990s on black wednesday then he put it back down after causing a recession but then it pick up again so it wasn't the end of the world. We now have the opposite situation where the economy is not growing, housing and oil infaltion are at record highs so these people in those industry don't want to hear how they are damaging the economy. I'd say that we are facing a really big elephant in the room with american banks and the fed, plus they are in debt to the chinese who have out grown america.

 

It should be interesting to see how the american empire copes in the future with it's addiction to oil and military over spending. Because they haven't even began to tackle the lack of productivity in their country.

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