• 28 Mar 2014 at 3:00 PM

Let The Fed Make Itself Perfectly Clear (This Time)

Throw away the tea leaves and stop parsing what Janet Yellen said last week. The Fed is not going to surprise you with a rate increase at Memorial, Labor, Thanksgiving or Christmas Day. You have nothing to worry about until next year. Late next year, at that. Capisce? Now calm the fuck down.

The Federal Reserve will likely begin to raise interest rates in the second half of 2015, but it could be much longer because the U.S. labor market needs time to fully recover from the recession, Federal Reserve Bank of Atlanta President Dennis Lockhart said Tuesday….

“We’re not going to flip a switch from easy money to tight money. We’re not going to flip a switch where overnight you go from one environment to a radically different environment. I don’t see that happening,” Mr. Lockhart said at a business conference in Atlanta. “The environment after the beginning of normalization of interest rates is going to remain, I think, very accommodative for some time after that decision.”

Mr. Lockhart’s statement Tuesday that “the second half of 2015 is a reasonable timeframe in which we might get to what we’re calling liftoff” echoed his prediction in a March 6 speech that the Fed would wait until “the back half of 2015” to start raising rates.

A top U.S. Federal Reserve policymaker warned on Tuesday that investors seem to be “misinterpreting” the Federal Open Market Committee’s predictions for when interest rates will finally rise.

Philadelphia Fed President Charles Plosser said the projections, published quarterly by the central bank’s policy-making committee, “are not forecasts” for the Fed as a whole but reflections of each individual policymaker’s expectations of appropriate monetary policy over the next few years.

Federal Reserve Bank of Chicago President Charles Evans said the central bank will probably raise interest rates in the second half of next year and the timing will depend on the pace of inflation.

“I do tend to think inflation’s going to pick up and that will be the reason why we ultimately raise rates,” Evans, who doesn’t vote on policy this year, said in a Bloomberg Television interview with Betty Liu today in Hong Kong. “My own take is it’s most likely to be in the second half of 2015. If I had my druthers, I’d wait a little bit longer than that….”

“Is it going to be a sharp increase or is it going to be a more shallow increase?” he said in the interview. “We expect it to be a shallower path of increases.”

Atlanta Fed’s Lockhart Says Second Half of 2015 Is Soonest Rates Could Rise [WSJ Real Time Economics blog]
Investors misinterpreting Fed officials’ tightening forecasts – Plosser [Reuters]
Fed’s Evans Sees Rate Increase in Second Half of 2015 [Bloomberg]

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  1. Posted by FatGuySkinnyTie | March 31, 2014 at 12:01 PM

    'Liftoff' is a cute way of putting something that will result in the financial equivalent of MH370