Fed to move?

[milesdividendmd]

It's irrelevant to my investment plan I know, but I just can't help but be fascinated by the coming fed decision on whether or not to raise rates off of zero. It's like watching a horse race in slow motion.

My guess is that the fed won't move tomorrow, because...where is the upside?  Will a 50 basis point interest rate cut in the future help us fight the next recession?

There is no sign of inflation. In fact the world seems to be fighting deflation, particularly with the commodity rout of late.

Plus Yellin is a dove.

So I'm guessing no. But who knows?

What do you think?

[wienerdog]

Since the target rate technically is 0 - 0.25% right now I bet the most they do is put the target at .25% and get rid of the low limit.  If they do this it is only because they are losing credibility.  They will soon have to move it back down and then QE4 will follow. 

If they were going to really raise rates they would have done it months ago when the numbers looked better.   All the numbers look worse today except the unemployment which is so far rigged it is ridiculous.

[milesdividendmd]

Wiener, you seem to be making two opposing arguments here, if I'm understanding you correctly.

On one hand you are arguing that the fed should have raised already, and on the other hand you are arguing that unemployment is higher than advertised.

If inflation is well below the 2% target, and unemployment is high, (and the dual mandate target is 2% inflation and full employment) then why exactly do you think the Fed should have raised already?

[wienerdog]

Wiener, you seem to be making two opposing arguments here, if I'm understanding you correctly.

On one hand you are arguing that the fed should have raised already, and on the other hand you are arguing that unemployment is higher than advertised.

If inflation is well below the 2% target, and unemployment is high, (and the dual mandate target is 2% inflation and full employment) then why exactly do you think the Fed should have raised already?

Just my opinion but they should have raised already this year if they were going to like back in June but they didn't so to me they aren't going to raise now.  I am not saying they should just that I don't think they will now if they didn't already.  The unemployment is 5.1% (7 year low) compared to June of 5.3% which really is no difference.  The big kicker to me is the participation rate is hovering where we haven't seen since 1977 almost 40 years.  Back then the unemployment was 7% or more. 

With commodities sliding since June I just don't see how they could if they haven't already.

[milesdividendmd]

Yeah the only justification for a hike is the "bullet in the gun" theory, but I don't think that that is a very convincing argument.

Right now, deflation, not inflation is the big risk.

[Lowerbills]

Prior to the market selloff in late August, the consensus was a 25 basis point hike in September.  At least my understanding is that's been the general sentiment for much of the year.

But then there was some back-peddling from various board members of the Fed.  I don't have a clue one way or the other, bu it's arguably the most important Fed rate decision (and meeting minutes) in some time.

I do think the Fed stands to lose a little credibility (whatever is left) if they don't hike.

Either way, I expect volatility...  It's pretty close to a coin flip, which means there will be some who expected hike, and were wrong.  And there's market participants who expected the Fed to stand pat and were wrong.

 

[Frugal D]

See comments here: http://forum.mrmoneymustache.com/investor-alley/it's-just-25-what's-the-big-deal/msg808658/#new

[milesdividendmd]

Links not coming up frugal d.

[Frugal D]

Links not coming up frugal d.

Hmmm...works for me. Just search "it's just 25 what's the big deal".