Fed Presidents Play Deal Or No Deal

We all know what's inside J-Yell's metal suitcase this time.
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Right next to the eagle would be good.

It’s happening, people... It’s finally happening.

The IMF may not like it, and God definitely doesn’t, but eight years of free and easy money comes to an end just over a month from today. It’s all but a certainty—barring, of course, the sort of data that has put paid to all of the previous certain liftoffs and allowed J-Yell to renege on her promises.

Over at the Chicago Fed, Charlie Evans isn’t thrilled about this. He’d like his time on the Fed Open Market Committee to end the way it started: with interest rates at zero. But he and his more dovish colleagues are coming to terms with the likely rate hike.

All they ask in return is that future rate hikes be few and far between. They’d also like that to be made into a true promise and then chiseled into the marble on the façade of the Eccles Building.

"It is critically important to me that when we first raise rates the FOMC also strongly and effectively communicates its plan for a gradual path for future rate increases," Evans said, referring to the U.S. central bank’s policy-setting Federal Open Market Committee during a speech Thursday in Chicago….

"Given my economic outlook and assessment of risks, regardless of the exact date for liftoff, I think it could well be appropriate for the funds rate to still be under 1 percent at the end of 2016," he said.

“After liftoff commences, I expect that the pace of tightening will be quite gradual,” he said. “In part, that is because monetary policy is not as stimulative as the low level of the federal funds rate might suggest.”

Unfortunately for Evans, Dudley and Boston Fed President Eric Rosengren, the hawks are feeling, well, hawkish.

After years of putting up with the doves’ nonsense, they sense that their moment has finally arrived, are they aren’t conceding a damned thing.

St. Louis Fed President James Bullard and Richmond Fed President Jeffrey Lacker told reporters they don’t want to get locked into a particular rate path….

“You should retain your options to say this looks a lot stronger, the economy looks a lot stronger than we thought, therefore we’re going to go faster,” Mr. Bullard said on Thursday….

Mr. Lacker said the Fed needs to avoid getting “stuck in a rut” that would impose a predetermined path on rate increases. He said he wanted to avoid the experience of 2004-06, when the Fed raised interest rates a quarter of a percentage point at regular intervals.

Evans Says Fed Must Send Strong Signal of Gradual Rate Increases [Bloomerg]
Fed Officials Stress Gradual Pace of Rate Rises After Liftoff [Bloomberg]
Fed Shouldn’t Be Locked Into Gradual Rate-Hike Path: Bullard and Lacker [WSJ]
Several Fed Officials Say They Are Ready to Raise Rates [NYT]
Economists Overwhelmingly Expect Fed to Raise Interest Rates in December [WSJ]
US Fed should wait with liftoff to see firm inflation signs –IMF note [Reuters]

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