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Trampa501

Interest Rate Rises 'won't Wreck The Recovery'

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My what a lot of spin + PR coming from the BoE press office today.

I'm guessing the came is up and they expect to track the US as IRs are normalised - note not tightened, normalised.

Those US labour figures must have been really good. And assume the next set of figures from the US are even better (or worse) - depending on where you sit/borrow.

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My what a lot of spin + PR coming from the BoE press office today.

I'm guessing the came is up and they expect to track the US as IRs are normalised - note not tightened, normalised.

Those US labour figures must have been really good. And assume the next set of figures from the US are even better (or worse) - depending on where you sit/borrow.

Yes, US probably going to try a token raising of rates (helps hurt Russia as well?) and we will be following. I wish they would just do it before Christmas, send a strong psychological message :lol:

Edited by dances with sheeple

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Yes, US probably going to try a token raising of rates (helps hurt Russia as well?) and we will be following. I wish they would just do it before Christmas, send a strong psychological message :lol:

But which Christmas? Sober Look suggests Fed policy trajectory is being determined by the pace of global recovery.

...the divergence between payrolls growth and inflation expectations is currently unusually high. Payrolls are driven by stronger US domestic economy, while inflation expectations are impacted by external factors, which creates this disconnect. This mismatch is causing a dissonance for policymakers and market participants, adding to the disagreement on the timing of liftoff. Current market expectations for the first hike now point to Q3 of 2015.

However if inflation expectations persist at these levels or worsen, it will be nearly impossible for the Fed to move on rates - irrespective of how much labor markets improve. The bet represented in the chart above is that energy prices will stabilize and/or growth in wages improves substantially by next summer - pushing breakeven expectations higher. But such an outcome, driven to some extent by factors external to the US, is far from certain.

What makes the timing of liftoff particularly difficult to estimate is the value of the US dollar.

With a number of major central banks either easing or expected to begin easing monetary policy (diverging from the Fed), the rise in the relative value of the dollar will continue. That will bring inflation expectations even lower by weakening US import prices and pressuring commodities. If the strong dollar can make goods and to some extent services from abroad cheaper, there is less incentive for US-based firms to raise wages. Tapping cheaper markets abroad becomes more profitable.

And as the expectations of liftoff draw closer, the dollar will strengthen further, making it more difficult for the Fed to pull the trigger (what some refer to as a "self-correcting" mechanism). It's hard to envision the Fed acting unilaterally in the sea of looser monetary policy worldwide. The policy trajectory of the US central bank is therefore tied to a large extent to the global recovery, which remains elusive for now.

The Fed officials are keenly aware of premature policy tightening by a number of central banks, who were forced to reverse their decisions later.

http://soberlook.com/2014/12/the-feds-policy-trajectory-is-tied-to.html

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The US is weird - trade makes up very little of its GDP.

Joe Sixpack does not need the rest of the world.

The fall is oil prices is giving the Fed some room to manouver.

I guess they are grabbing it.

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Yellen will only be concerned with domestic employment and the path for domestic wage inflation/real wages.

Theres alot of ground to make up.

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But which Christmas? Sober Look suggests Fed policy trajectory is being determined by the pace of global recovery.

utter rubbish as usual.

inflation concerns are exactly why the fed would move on interest rates..look at volcker circa 1980

actually the oil price chart looks like a carbon copy of the 1970's(somewhere around 1977 presently).

when the rates go up, the bond bubble will burst.

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