Fed's Plosser Calls for "Preemptively" Rate Hikes
Submitted by
CalculatedRisk on Thu, 06/12/2008 - 10:22am (113 comments)
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He was always the hawk, now they just made him more prominent!
talk is cheap
Hey, wait...that's the wrong signal to send. You mean cut, cut, CUT!!!!!!!
Yeah sure, raise the rates now by 25bp, then lower it on August by 50bp.
It's all just talk...
Certifiable Ass
This is going to be fun. Raise interest rates in the face of a recession and with gas prices out of control. Whopee. (I think Obama has it made, whatever he does).
So then why not do an emergency rate hike?? Cause it's all BS talk and nothing more, trying to talk down commodities. Here's a hint Plosser talk is cheap, do an emergency rate hike of even a .50 and watch what happens to commodities.
What do you want to bet tomorrow's CPI number comes in hot?
First there were comments and then they disappeared.
The Bush appointees will out vote him.
Haloscan is acting up.
"Preemptive"? Preemptive would mean doing something before price inflation becomes a problem, not after. Am I missing something?
(But other than a gripe with his choice of words, I do support his position, and it's refreshing to hear at least one member of the Fed proposing action that is oriented toward its mandate--price stability--rather than catering to Wall Street.)
Nemo,
Tomorrow's CPI will come out "better than expected", along with a bunch of ex-this and ex-that...
Certifiable Ass
It's been said before, but -- damned if they do, and damned if they don't.
And I'm not convinced that they'll "do" in any meaningful way, despite their tough talk.
Just how soon is "preemptive"?
It gives me inflation when they try to talk tough
I just can't take anyone that would use the word 'preemeptively' seriously.
Wow, if the core CPI jumps to just .3% tomorrow, they may have to raise rates just to maintain credibility after all this talk. Maybe that's what Plosser wants?
Pablo Escobar writes:
Just how soon is "preemptive"?
If they have to mention it, it's already too late.
I think this is part of yesterday's CNBC headline about Fed talking inflation down.
We're screwed NESW, and zenith too.
Certifiable Ass
any way we do it "Retroactively"?
Apologies for OT.
I've been using the beta Firefox 3 for a few weeks, and Haloscan has been very well behaved for me during that time. It may just be a coincidence though.
Firefox 3 is scheduled to be released next Tuesday.
Has any talking FED heads ever appeared on CNBC and said that they will Preemeptively cut rates???
No they just do it. (So they can kill the shorts and help the market up.)
But when it comes to hiking they will talk about it to death. So the more talking they do the less likely they will do it. JMHO.
"We need to take steps to insure that inflation does not get out of control,"
To late for that line of crap Chucky.
"...it's refreshing to hear at least one member of the Fed proposing action that is oriented toward its mandate--price stability--rather than catering to Wall Street.)"
The Fed has a dual mandate. Not just price stability, but full employment.
This is great. If the Fed preemptively raises rates to combat inflation as is their job then all my Jan '08 bond futures didn't really expire worthless. I promise to spend the windfall wisely.
The current national housing crisis will continue to cause disruptions in the economy as interest rates increase on more mortgages and more home loans fail, the top U.S. housing policymaker said on Thursday.
Housing policy chief sees more challenges ahead
| Reuters
Today must be Mr. obvious day.
"Inflation is Always
and Everywhere
a Monetary Phenomenon"
is it?
CNBC :Yahoo, Microsoft Talks Have Concluded with No Deal: WSJ
We may yet finish in negative today.
I call for "preemptively" declaring that the recession is over.
S&P Lowers Ratings on 65 classes of Alt-A Securities
http://image.minyanville.com/assets/FCK_Aug2007/File/Pics%2020/news_story.txt
Sure they'll raise rates...not!
The 10 year yield has really jumped today
"is it?"
No it is from 536 dipsticks in DC spending like drunken sailors and using borrowed money to do it, the seed money has to come from somewhere and it ain't from the FED.
Somebody just sold tech.
Any rumors on the LEH offering?
energyecon writes:
Any rumors on the LEH offering?
i thought Greenberg bought into em.
What Inflation? Some Items That Actually Cost Less
Inflation Isn't Universal: See Where Prices are Falling - CNBC
Another reason why the Verbal Intervention won't work. Cause there really wasn't that much inflation anyway.
Rates talk, bullshit walks!!!
Wntil we actually see the rate raised, no need for anyone to react.
Primary dealers submitted bids totalling $27.2 billion for the $25 billion of Treasuries offered on Thursday in the Federal Reserve's Term Securities Lending Facility (TSLF) auction.
Dealers submit $27.2 bln bids at $25 bln TSLF auction
| Reuters
The fraud continues, watch what they do not what they say.
This link from yesterday fits yet again....
http://mama.indstate.edu/users/nizrael/midis/bigtop.mid
Total imbeciles
Ciao
MS
(OT: Varsity high-dive demonstration may be starting at the Nasdaq 100).
Garbage in, treasury out...
Let's see who, among primary dealers, needed $5 billion cash infusion?
Mino writes:
Garbage in, treasury out...
Nice quote!
Yep, we need to preemptively close the barn door after the horses, cows, ticks, and chiggers have all left.
This is going to be fun. Raise interest rates in the face of a recession and with gas prices out of control. Whopee. (I think Obama has it made, whatever he does).
Chris | 06.12.08 - 2:35 pm | #
I think he is in for deep trouble - he is probably going to be elected, and make Carter look good (irrespective of his actual efforts).
"Preemptive" is the new "Inconceivable!"
The Dow is up 44. Where are my pump monkeys? Where is my PPT?
The fed is all talk and Wall Street knows it. I will believe they will raise rates when they stop giving away free money to the banks,,,
What a bunch as windbags..
Acceptable choices:
Fed's Plosser Calls for "Preemptively" Raising Rates
Fed's Plosser Calls for "Preemptive" Rate Hikes
Fed's Plosser Calls for Rate Hikes "Preemptively"
I don't think it means what you think it means. Inigo Montoya (sp?)
Bernanke said that high prices are causing inflation, so we have a lot of that.
funny extending it further.
Bernanke can clearly not choose the cup in front of you.
similarly,
he can clearly not choose the cup in front of him.
alas. too bad it's a tragedy, or it'd be funny.
Hey Plosser. Not only is the horse out of the barn and the corral, but it is in the next county. Preemptive?
pump monkeys are what's responsible for today....now when those wonderful inflation numbers come out tomorrow we'll "only" be breaking 12k....sort of like last Thursday into Friday...we all know how that worked out..
Ciao
MS
Sorry I missed the earlier thread. Let's not have any foolish talk about how rates on the 10 year treasury are going up because of inflation fears or FCBs bailing out of US debt. No... yields aren't going up because the deficit's too big and the US is going bankrupt or because nobody wants to recycle petrodollars anymore (not yet anyhow).
This time the answer is amazingly simple.
As always it comes back to the One Ring that Binds Them:
Long Rates vs. Easy Money
The Fed doesn't control open market interest rates, the Chinese do, and when they say enough is enough, look out.
"(I think Obama has it made, whatever he does)."
Who is going to be on watch when the printing presses are fired up to give the Boomer's SS and Medicare. We ain't seen inflation yet until that ball starts rolling downhill. An no they won't fu#k them out of it, no political will form either side but the dollar will collapse, the bond market will collapse and the empire will fall. Boomer's retierment is the 800# gorilla that no one wants to talk about.
Anonymous writes:
pump monkeys are what's responsible for today....now when those wonderful inflation numbers come out tomorrow we'll "only" be breaking 12k....sort of like last Thursday into Friday...we all know how that worked out..
Ciao
MS
Yea, this is most true.
Mr. Market is off his meds - he can't make up his mind today!
OMG - Cut, Cut!!
No, wait ... Raise! Raise!
S**T!!! Stop Raising ... Cut, Cut!!
... Hang on ... wait for it ... now - Raise, Quick!
Oooops! Cut, Cut, Cut!!!
(Fed Reserve is starting to look like one of those positions you should deliberately leave OFF of your resume.)
who called red tape earlier today? kudos!
bluestatedon writes:
Yep, we need to preemptively close the barn door after the horses, cows, ticks, and chiggers have all left.
bluestatedon | 06.12.08 - 3:13 pm | #
More like...
Preemptively close the barn door after F5 inflationary tornado blows us, barn and contents from Kansas to Oz...
It is entertaining watching Lehman's stock price go down.
The quote from KD over on Market Ticker is elegant in its crystal clear logic: why buy for $28 what you can buy for (now) $22.50 on the open market?
jg,
yes just how is that 'oversubscribed' bit working out again?
jg writes:
It is entertaining watching Lehman's stock price go down.
The quote from KD over on Market Ticker is elegant in its crystal clear logic: why buy for $28 what you can buy for (now) $22.50 on the open market?
Someone oughta Tell that to Greenberg.
Tom Servo writes:
The Dow is up 44. Where are my pump monkeys? Where is my PPT?
They were in at the open... now its the 'dump monkey' half of the act... don't you know nuthin'?
Closing the barn door works if the barn hasn't burned down.
My cheap opinion -- watch Trichet. ECB raises, FED will have to follow suit... preemptively.
Phew! I was afraid I wasn't going to be able to sneak in the P-word.
I have been logging, daily, the volume of S&P 500 futures purchases over the last year or so.
Today will certainly break the standing record, set in mid March.
The schmucks/shysters/shylocks are in near panic mode today, to keep this market from crashing, or closing down.
So going short SPX this morning was a good thing, I suppose. And if it rallies again pre market tomorrow, wash, rinse, and repeat.
Rule 80B for 2Q '08: Level 1 Circuit Breaker = DJIA down > 1200 pts.:
Before 2:00 pm = 1 hour halt
Between 2-2:30 = 30 min halt
After 2:30 = Let 'er Rip
Oil went positive. Must be all that talk about rate hikes.
Headline of the day
Lehman's Gregory, Callan Decided To Resign -Fox Business
I bet they did. Let's see getting rid of the only two public officers that could speak to what has been transpiring over at LEH just before it's conference call sounds a little fishy to me.....and that it's reported on by that bastion of level-headedness
the FBN makes it even better.
but that's just me.
Ciao
MS
Wow, those PPT guys are tricky.
They are now pushing the market DOWN, via futures purchase 4 points below the S&P's current price.
Classic jaw-boning.
There is no way the Fed raises rates this year.
This 'tape watching' is KILLING my productivity! Dang it!
jg-
where would one find that information...other than a B'Berg term.??
Ciao
MS
Here you go, MS:
Intraday Futures Prices - Markets Data Center - WSJ.com
Think the bond market is getting it's ass hair ripped out today.
My cheap opinion -- watch Trichet. ECB raises, FED will have to follow suit... preemptively.
What does Trichet think about all this? Hmmmmm... not sure what this means, but I don't think its good news for Ben.
thanks JG...had that one.....
Ciao
MS
Oil market is saying we'll see your bet and raise you a couple.
They were in at the open... now its the 'dump monkey' half of the act... don't you know nuthin'?
I guess I don't know anything expect this market is giving me a migraine.
will LEH hold it's PM low......possibly.
21.17 is it......such confidence in that stock now..
Ciao
MS
Is it the fed driving the market, or the market driving the fed?
As the yeild curve steepens based on inflation concerns, the effects of the rate cuts diminish.
Personally, I thought most of the cuts were to protect people from ARM resets and allow them to refinance. If so, as the long term rates increase and the window of oppertunity for refi's closes... the fed will be mutch less likly to hold it's thumb on the LIBOR scale.
As the yeild curve steepens based on inflation concerns, the effects of the rate cuts diminish.
Not if you are in the business of borrowing short and lending long (banks)... then steepness equals sweetness. Of course the fed would never help banks at the expense of the REST of the economy, right?
LEH may be hitting the death spiral phase now. Interesting that it's balance sheet is exactly the same size as the Fed's - about 700 bio now, with LEH supported by a whopping 25 bio in capital. Given that the Fed has already committed over half its balance sheet, a LEH failure would be the tipping point that puts the financial system into chaos. I won't be going home short the bond market this w/e...
Markets will close positive.
If I was New Jersey or Greenberg I'd be reading up on 'force majeure(SP)' a bit.
I think his PR earlier was crap....he's not buying onto this at all. Just a page out of Carl Icahn's "shareholder value" BS....
would you @ 28??
Ciao
MS
Not if you are in the business of borrowing short and lending long (banks)... then steepness equals sweetness. Of course the fed would never help banks at the expense of the REST of the economy, right? - dryfly
Fed replies; "What rest of the economy?"
Rob Dawg says; get back to me when a Fed governor leaves to take a job in tech or mfg.
Turbo,
Don't want to be short the bond market if LEH fails. Hmmmmm... I know where you're coming from but give that one more thought. If LEH fails and gets bailed out I think you could see bond yields explode.
Good one, dry!
There's a longer version, but that sure captures the gist.
The Fed doesn't control open market interest rates, the Chinese do, and when they say enough is enough, look out.
The Fed can ultimately keep down interest rates if they really wanted to because the fractional reserve system effectively allows them to buy an infinite amount of debt. I.E. they can ultimately loan out an infinite amount of money, and of course supply and demand dictates that unlimited supply can push the price of a loan (i.e. the interest rate) to some infinitely small amount.
The easiest way to do this is to endlessly monetize new treasury debt.
Of course those arbitrarily low interest rates don't come without a cost. The price of artificially pushing down interest rates is a devaluation of the currency.
So ultimately they can choose between higher and lower interest rates. But that necessarily implies choosing between a dollar that's worth something and a dollar that's worth nothing.
This scenario is of course theoretical and assumes and ideal environment for the fine economists and bankers at the Federal Reserve.
In the real world the central bankers might run into complications devaluing the dollar without limit. Like the unemployed truck drivers waiting for them to come out to their cars in the evening, patiently waiting and at the ready with their coils of rope and rolls and rolls of duct tape.
Nice end-of-session pump job by the schmucks/shysters/shylocks to end 'green'!
Gamma - the market now has 86 bps of Fed hikes priced into the second half of this year, which I'd expect to be taken off the table very quickly if LEH fails. You're right to think long yields might not like the inflation expectations embedded in that though. The 2's/10's curve has flattened visciously this week. A LEH failure would like result in the yield curve becoming much steeper (via the front end rallying).
definition of Pump is the LEH I-day (1 minute) from about 10 minutes to the close.
I didn't know they had brushes that big...
Ciao
MS
Gonna be a real interesting day tomorrow with June options expiring. LEH trading is going to be off the hook with all of those 17.50 Puts trying to get paid off. I'll bet there are some serious elephants dancing in the room.
Do you put your money on the Puts winning, or are those a lot of average Joe's competing against the IBs, hedgies, and institutional investors. I suspect the deeper pockets are on the plus side, but I could be wrong.
Gavshire Hathaway, isn't tomorrow only the 2nd Friday of the month?
From what I know this situation is eerily similar to that in 1929 when the Fed agressively lowered rates to stem the downturn in the economy.
However, a dollar run against gold emerged, and the Fed evenutually reversed course and increased rates. BB says this was their big mistake.
Now the Fed has lowered rates to stop the down turn, but the dollar is crashing against oil (not gold). The question is will BB increase rates and cause a serious downturn. Or will he follow his theory, in which case we will find what surprise is behind Door #2.
Do you prefer the devil you know or the devil you don't know?
opex a week from tomorrow...
Maybe you're right. Somebody on another blog mentioned it was tomorrow. But it does seem a bit early....
RThomas - the choices are:
Important points:
3 ain't going to happen, given wage data, debt size and growth, and rising interest rates.
2 is considered "bad" by the Fed because they want to have their cake (the economy) and eat it too (the currency). The 1929 method chose to
save the currency instead of the economy.
1 is considered preferrable by the Fed, which apparently thinks currency destruction can be "contained" such that it doesn't also destroy the economy that functions off that currency. Apparently these numbnuts think the anti-1929 method also offers a choice between the economy and the currency, when in fact the anti-1929 method offers no such choice. As goes the currency, so goes the economy...
Bond of steel wrote:
"As the yeild curve steepens based on inflation concerns, the effects of the rate cuts diminish."
Except that the yield curve isn't steepening, it's flattening. In fact, 2's to 10's has flattened 92 bps (from 208 bps to 116 bps) in the last 3 months. Heck, it's flattened about 35 bps in the last week alone.
Using your logic, the market doesn't have inflation concerns.
I still maintain that the strongest Fed position would be to simultaneously raise and lower, thus boosting the economy and fighting inflation at the same time.
"gab writes:
Except that the yield curve isn't steepening, it's flattening. In fact, 2's to 10's has flattened 92 bps (from 208 bps to 116 bps) in the last 3 months. Heck, it's flattened about 35 bps in the last week alone."
Exactly. This has been the mother of all flattening moves, especially in EUR (euro) and GBP (british pound).
That is in reference to the "coupon curve" - e.g. 2-10 years. The policy rate has not risen yet, but the expectation built in for them to go up.
"Using your logic, the market doesn't have inflation concerns."
My interpretation of the curve previously was exactly that: no worries. Then the market got crushed.
At present, one can argue that there are no long term inflation worries priced into bonds. However, there are worries about the coming year(s). The expectation is that the G7 central banks will raise rates to "contain" inflation (ha ha - he said "contain").
The idea is that inflation rates should moderate when the G7 falls into a depression.
LEH, I don't think there's a good outcome. If they don't bail, then MER and MS will be quickly ridden to ground.
If they do bail, I'm not sure it restores any credibility, since now we're being asked to believe there were only two cockroaches. And now the Fed's balance sheet would be gone.
Not considering its moral implications, possibly the best strategy to reliquify the US would be to conquer Venezuela.
I think they are working on that too...since that "awful Chavez" controls a bit more oil than GWB would like him to.
Honestly how did anyone vote for him the last time????
Ciao
MS
The Fed doesn't control open market interest rates, the Chinese do, and when they say enough is enough, look out.
Somehow, the stories about Tibet and all the children killed in the earthquake have just faded away.
Damn Fed is killing my short term bond's plan causing me a 1% loss in over a week.
However, I fully expect to make it back when LEH continues to implode and MS, GS, and the rest of the IBs report their earnings ahead of next week's triple witching hour. I expect to make back.
If LEH explodes, I will wait until the 2 year hits 1.5% and then bail as everything will hit the fan. At that point, we will be looking at a crash and hyper inflation.
Maybe the Fed is taking us up on our suggestion of tighter monetary policy. Many people complain that Fed policy is too loose and then find a way to complain about talk of reversing the policy and work it into a narrative of major economic problems. I agree talk is cheap, but once we see the rate hikes, we have to stop complaining.
Who are these people? Can we imprison him for fraud?
Another positive development. The Fed has to get the hell out of the way and allow the markets to deflate.
"Charles J Gervasi writes:
Maybe the Fed is taking us up on our suggestion of tighter monetary policy. Many people complain that Fed policy is too loose and then find a way to complain about talk of reversing the policy and work it into a narrative of major economic problems. I agree talk is cheap, but once we see the rate hikes, we have to stop complaining."
Most people here will complain regardless of what the Fed does. They are shocked that the Fed looks after the interests of banks rather than the interests of double-short financial ETF holders.
Also we don't need to wait for hikes to materialize; Fed rhetoric has already tightened monetary conditions. By pushing up term interest rates, the carry has improved for the USD versus other currencies on a forward basis, and it raises rates for corporations that borrow against term LIBOR in their floating rate liabilities. The Fed doesn't need to move the funds rate itself to have an impact on the financial markets and the economy.
In the second instance, the Fed has to become accustomed to relying on domestioc savings to support the budget deficit. This will require positve interst rates at inflation + 3.5 %.
That's about 8 % right now.
The game that has been afoot the last 8 years is a game designed to destroy America. I'm with Dennis Kozunitch (sp?)
zinc writes:
In the second instance, the Fed has to become accustomed to relying on domestioc savings to support the budget deficit. This will require positve interst rates at inflation + 3.5 %.
That's about 8 % right now.
The game that has been afoot the last 8 years is a game designed to destroy America. I'm with Dennis Kozunitch (sp?)
zinc | 06.12.08 - 10:55 pm | #
But the fed plays on the short end - the 'market' at the long end... you can still have >8% long yields and fed under 'inflation rate' short IF the world tells us to pay our own bills & we have to fund our own debt.
And that would deflate some assets for sure EVEN if the fed puts liquidity into the system. Thy couldn't stop that even if 'prices' for non-assets' sky rocketed.
In fact I'd expect that to eventually be the case. The yield curve could be as steep as the North Face until the world regained confidence we'd actually make good on our debts - in REAL wealth they can consume/invest. That reassurance wouldn't come overnight.
One of the ironies I see is the possibility of a 1929 Depression in spite of all the theory on how to avoid one because the same concerns that got us in the last on are in effect now.
The yield curve could be as steep as the North Face until the world regained confidence we'd actually make good on our debts - in REAL wealth they can consume/invest. That reassurance wouldn't come overnight.
Two things that require little capital investment that would grease the wheels, and bring sanity back to our twin deficits. One, regulate the commodities market a little bit better. Half the world is as sick of $140 oil as we are. Two, remove the damn ethanol subsidies.
Bond guy,
You are WRONG. Most people are shocked that the FED is run by a private company that has destroyed our nations currency and purchasing power for to benefit their friends.
It's good to see people like you complaining, maybe the bond market is starting to adjust to the real rate of inflation.