Fed's Plosser: Raise Rates "Sooner rather than later"
Submitted by
CalculatedRisk on Tue, 07/22/2008 - 5:50am (67 comments)
in
![Syndicate content](/misc/feed.png "Comments for \"Fed's Plosser: Raise Rates "Sooner rather than later"\""){kind=small}
Shopping at Amazon?
Wait! If you click on the Amazon banner link at the top of the page first, HCN will get a percentage of anything you purchase for 24 hours!
Open predictions
Our local book authors
User login
Who's online
There are currently 15 members and 132 guests online.
Recent Recommendations
More toothless tiger roars.
I wonder if it ever occurs to these geniuses that the economy will experince slow growth and inflation no matter what they do now?
Whatever, I believe it when I see it.
But, the short sales rules and congress trying to legislate away futures trading in the oil market is having an effect. How are the IBs & HFs going to make any money ? The old fashioned way won't support the bonuses.
GS is going to need a new Christmas card list.
Seems to me, the real root of today's inflation is commodity prices. If we could at least get the "investor premium" reduced by limiting futures trading to actual end users, maybe we could relieve a little of the inflation problem without raising rates too much?
Just a thought...
In the middle of this mess, the least they can do is reward the concept of "savings account" for the little people such as myself. There's no point in putting money in the bank... your interest rate is practically zero.
Spunkmeyer,
That the crutch, u then have to put it into the market to "HOPEFULLY" realize any return above inflation.
Costa Rica or Brazil might be a great place to hang out for 5 years or so...
Are we moving away from the "Destroy the village to save it" monetary policy?
I write one comment and turn back to trading screen and poof the markets green by 30...Bizarro world..
Plosser is a strawman. They will cut.
Just politics.
Yen and euro started tanking this morning due to the clear signs of a turnaround in the US housing market... /sarcasm
they don't control rates.....they just can adjust the spreads the banks make. That is all they can do. Check Jumbo rates lately??? There moves mean nothing.....
But people believe they have control over them otherwise why would the elected officials call them "the experts".
Ciao
MS
Wage-price spiral?
Conjure says, "BWAHAHAHA!"
Anyone catch any coverage of CBO news conference on the estimated costs of the Fannie and Freddie bailout?
As long as wages are tame, the Fed won't raise rates (as if that would do any good in present circumstances). Wages will be tame, because (list of reasons).
Ergo, Mr and Mrs Worker: Suck on this!
Watch what I do, not what I say.
Let's do it as the bond market is already taking back more of the rate cuts. Bloomberg has the rates as :
Term: Current: 1 Year Prior
Fed Rate: 2.00 5.25
15 yr Mortg 6.02 5.99
30 yr Mortg 6.47 6.29
1 yr ARM 6.33 5.58
30 Year Jumbo 7.48
You can also see it in the 2 year bond as it has gone from approximately 2.45 to over 2.67 or up 10% in the year in approximately two weeks.
So, it does not matter as the bond market has already priced in a rate hike as liquidity has vanished in the market. Note, these rates doe not include the additional cost such as additional points.
Hope you have locked in your rates. Cheers
One thing is certain, they won't raise rates before election. See no move (up or down) before election. Of course, if misguided Plosser had his way, they would be higher. He's fighting a different battle than I think he should.
Oil keeps on declining - ~$127 last time I checked. Of course, Iran is always a concern, but it will be interesting to see where it settles. My guess is that it still has more to drop.
Fed Funds futures and 13-week T-Bill are skeptical.
So am I.
MS - "they don't control rates.....they just can adjust the spreads the banks make"
Of course. Banks are a basket case. But if bonds and rates go higher banks get shielded to some extent (for salvagable institutions) by Fed. CRE, not so much. That's where a disproportionate amout of pain will be experienced from here - imo.
Also, no way do they raise rates as long as WHAM-u and WackyBank are acting like they are going to zero.
Anyone catch any coverage of CBO news conference on the estimated costs of the Fannie and Freddie bailout?
I bet it went like this:
Yammer yammer yammer.
(psst. How's our budget looking next year?)
yada yada yada.
It won't cost too much. This thing is savable.
GooooooOOOOOO HANK!
In addition to rising mortgage rates, corporate borrowing costs have also increased over the past year. Especially at the intermediate and long durations.
The fed is all hat and no cattle. Fiscal policy is the real wild card.
In any event, I still see higher rates and a weaker dollar.
They will only move the short end of the curve up if the long end has already done so.
We are still a few bank failures away from that I am afraid.
In other words...the dollar will have to be sacrificed completely....FIRST.
The action most in this administration are pondering is Dubai or Paraguay.In Dubai you might end up in a threesome with Michael Jackson and Dick Cheney,While Paraguay has better and cheaper coke and frauleins.
A really good article about how we got in this mess!
Asia Times Online :: Asian news and current affairs
Short rates low + long rates high = banks make money.
Banks make money faster than they admit insolvency = the Plan.
Just my uninformed guess.
Short rates low + long rates high = banks make money.
GO, EURO, GO!
Gov't data out on home prices..
U.S. home values declined 0.3% in May, falling for the 12th time in the past 13 months, the Office of Federal Housing Enterprise Oversight reported Tuesday. Home values were 4.8% lower than a year ago, the largest year-over-year decline in the history of the data. Prices rose 0.3% in the Pacific states, the first increase in that region since last July. The OFHEO index tracks mortgages data from Fannie Mae and Freddie Mac of sales of the same homes over time. It does not include jumbo loans, or subprime loans, so it may understate the declines in the most bubbly areas of the country, especially California, Florida, Nevada and Arizona.
The fed does influence interest rates, especially at the short end.
Just go and read Bernanke's helicopter speech if you don't believe me.
Watch what they do not what they say. No cut, No way, No How, Ain't gonna happen.
well, if there is an imminent raise in the rates, then maybe I shouldn't do my 4.11% 7-month BAC CD or the 4.25% 12 month CD from wachovia...
ROFL.
But, the short sales rules and congress trying to legislate away futures trading in the oil market is having an effect.
The futures trading will just move offshore unless this is something that is done globally, and I don't know if say, the Dubai exchange has an interest in suppressing oil prices.
As for suppressing short sellers, look at the Shanghai index (down 55% last I checked) to see how well not having short sellers props up stock prices.
Fed Funds futures and 13-week T-Bill are skeptical.
My policy now is to ignore everything the Federal Reserve says and simply look at their actions.
In defense of the Fed they are not covert about their game plan. They make no bones that they perceive their job to be orderly markets and the perception of inflation. Their actions have been consistent with those two in that order.
They still have one shred of credibility left as well. To date they haven't even floated the idea of "updating" OER (owners equivalent rent).
Clearly the unspoken goal is to get US wages globally competitive. That appears to be via a combination of devalued currency, inflation and stagnant wages.
It seems Moody's has downgraded Assured Guaranty. Isn't AGIC the company that Wilbur Ross invested $1 billion in? That's gotta hurt.
I think it hurt more being named Wilbur.
Paulson says that 99% of banks are well capitalized. I will sleep better.
His lips are moving, so he must be lying.
Wachovia up 1.5% on the day now and continuing! Yay, the world makes sense.
Energy trader SemGroup LP filed for bankruptcy on Tuesday after a failed oil hedging strategy left the fast-growing firm short of cash, its publicly traded unit, SemGroup Energy Partners LP , said in a regulatory filing.
Huge oil trading loss sinks energy trader SemGroup
| Reuters
They shot shorty then they took his gun.
up 7.5% now. next pause at 15% up. then 25%. gotta love it. this will embolden other banks to cut div. as it will stend stock soaring!
Wage inflation??? Is he nuts? Anyone asked their boss for a raise lately? I raised this question with execs at several firms over dinner last week, they all belly laughed at me.
Why don't we just change the way we calculate inflation until we get the numbers we want? This is America, after all.
"Wachovia up 1.5% on the day now and continuing! Yay, the world makes sense.
That's because massive loses are so "soothing" to investors.
OK, sarcasm aside, why is Wachovia up 7%? Is it the old "mostly behind us" syndrome, or something else?
Ok AC, I know you don't believe in ppt, but what do you make of this...
wow, what a bunch of armchair geniuses, look i know charlie plosser, he is a guy who has a respected cozy position, and is not directly in the line of fire,
sweet gig, i bet if you had it you would shut up and play ball with ben and hank, instead he sticks his neck out, and not only votes (twice) against the Fed Chairman's policy in private, but publicly calls him out,
and you complain about it, c'mon.
That knarly fact is that raising rates will do nothing about commodity prices. Nothing.
So, we let everyone and his little brother access to the Feds balance sheet and the Fed is going to raise prices? Not bloody likely.
Moreover, we could end up with a period of both low economic growth and high inflation.
At least we know his rear view mirror is working.
There's a fine line between being a maverick and being a tool.
"Wage inflation??? Is he nuts? Anyone asked their boss for a raise lately?" PW | 07.22.08 - 11:09 am
"Wage-price spiral? Conjure says, 'BWAHAHAHA!'" mp | 07.22.08 - 10:29 am
Ahem. Don't Federal & State employees sometimes get inflation adjustments to their wages?
"Wachovia up 1.5% on the day now and continuing! Yay, the world makes sense."
Where do you expect it to go? It IS illegal to sell or even imply that you're thinking about selling a 'merican bank now, you know!
It can only go up.
Buy, buy, buy...everything can only go up.
Vino,
Plosser may be talking, but he is not the Fed. What Nemo says is the biggest factor right now: the Fed needs - REALLY needs - to keep banks profitable.
Ahem. Don't Federal & State employees sometimes get inflation adjustments to their wages?
And certain Federal and State employees even get to vote on their own wage adjustments.
Personally, I'm just tired of people tying me to this damn anchor time after time. Stop telling me what to expect!
Oil is now down 15% (145 to 125). This will cause PPI to go negative in July, good news for the Fed's forecast of inflation.
Now that oil prices on futures markets are going down, the MSM is pointing to speculators driving the price down. On the way up, the MSM only quoted people who said that the increases were due to fundamentals. What a joke.
Elvis,
I think I speak for most of us here when I say:
I long for the time when we can declare, Elvis has left the building.
Get over yourself dude! Get a job too!
Well said, Rob Dawg. US workers have been squeezed in wages in part because the Chinese govt has been propping up its export sector by buying US debts. If we devalue their holdings enough, perhaps we can get them to stop pegging their currency. This would increase prices of Chinese goods and make some US manufacturing competitive again.
Overconfidence is having unmerited confidence--believing something or someone is capable when they are not. Scientifically, a situation can only be judged after the aim has been achieved or not. Confidence can be a self-fulfilling prophecy, as those without it may fail or not try because they lack it, and those with it may succeed because they have it, rather than because of an innate ability.
Choking refers to losing confidence, especially self-confidence, just at the moment when it is needed most and doing poorly as a result e.g. in sports. This is found as a common plot device in literature and film, and is usually devised to result in a total alteration of a character's life.
Confidence - Wikipedia, the free encyclopedia
See Also: For 1937, Howard and Smith turned their attention to February's Santa Anita Handicap. California's most prestigious race was worth over $125,000 (over $1.5 million in 2006 dollars) to the winner and was known colloquially as "The Hundred Grander". In their first warm up race at Santa Anita Park, they again won easily. In his second race of 1937, the San Antonio Handicap, Seabiscuit suffered a setback. Bumped at the start and then pushed wide, the horse trailed in fifth, with the win going to the highly-fancied Rosemont.
The two would be rematched in the Hundred Grander just a week later. After half a mile (800 m), front runner Special Agent was clearly tired and Seabiscuit seemed perfectly placed to capitalize, before inexplicably slowing on the final straight. The fast closing Rosemont edged out Seabiscuit by a nose. The defeat was devastating to Smith and Howard, and widely attributed in the press to a riding error. Pollard, who had seemingly not seen Rosemont over his shoulder until too late, had lost the sight in one eye in an accident during a training ride (not during a boxing match as implied in the 2003 film), a fact he hid throughout his career. Regardless, the horse was rapidly becoming a favorite among California racing fans, and his fame spread as he won his next three races, before Howard chose to again relocate the horse, this time for the more prestigious Eastern racing circuit.
Wiley C. has confidence in spades. This Acme kit is the real deal.
The issues with Owners Equivalent Rent is really muddying the waters. If the housing component of OER was able to capture the decline in real estate, the rise in commodities would be ofset by the decine in the OER. Of course, if OER did capture some of the decline and CPI was adjusted downard, people would cry even MORE about the disconnect between prices and headline CPI.
In my opinion, broad measures such as the CPI don't work well when some components skyrocket upward and others downward.
As an engineer, I find this very messy. Let's just go back to the gold standard and replace one problem with another!!! I often wonder why the world can't be as elegant as a recursive tree traversal algorithm.
Igor, in the long run, it is that elegant. If you fsck up, you die. Works for organizations of all sizes too.
His comment was solely for international consumption to talk up the dollar, IMO
Back then, the Fed was concerned about the threat of deflation. Today, as we all know, this is not the case.
Say what? trillions of dollars in loans that will never be paid back isn't deflationary?
Just saw it on bloomberg. I think these speeches would have a lot more punch and will have just as much credibility if they used Muppet characters giving the speech.
Somebody at the Fed better start making some new WIN buttons soon. That whole plant a garden thing is a little played out though. How about?
Whip Inflation Now
Hire An Illegal!