Thursday, October 13, 2016

Fed Rate Hike Imminent - More Fed Irrelevance

Now that interest rates have increased everywhere except in the overnight repo market and the federal funds market, the Fed will boldly announce a 25 basis point hike in repo and funds. What choice do they have?

If the Fed does nothing, it exposes the fact that their policy has no influence over interest rates.  The ten year yield has now pushed through the 1.8 percent level and is headed higher.  So are all other rates.  How stupid is the Fed going to look in a higher rate environment if they don't move their two (largely irrelevant) rates higher?

It will happen soon.

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