Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Why the Fed Won’t Raise Interest Rates in 2015

Interest-Rates / US Interest Rates Dec 07, 2014 - 03:56 PM GMT

By: Investment_U

Interest-Rates

Alexander Green writes: U.S. short-term interest rates have stayed near zero for six years.

But if there’s one thing investment analysts of all stripes can agree on now, it’s that the Fed will start gradually raising rates in 2015.


I wouldn’t be so sure.

Yes, the Fed announced the end of its quantitative easing program in October. But it also said it would not raise interest rates for “a considerable time.” It also said future rate changes would be “data dependent.”

Translation? The central bank wants to see what happens with consumer prices. In particular, it wants to keep inflation under 2%.

That shouldn’t be a problem. The current rate is only 1.7%. And even that should soon come down. Why?

For starters, the U.S. is about the only healthy horse in the race among developed nations. Europe is stagnant. Japan is back in recession. Even China is struggling with slower growth.

Weak global demand keeps a lid on inflationary pressures.

So does a stronger dollar. The greenback is up 10% since May and recently hit a five-year high against the euro and a nine-year high against the yen.

That makes imports cheaper in dollar terms. And makes it tougher for domestic companies to raise prices. Score one for consumers... and for inflation hawks.

The Oil Patch

Then we have the recent trouble in the energy sector. Since mid-June the price of Brent crude has plunged more than 30%, from $116 a barrel to a five-year low of $67.50 on Monday.

This is bad news for oil exploration and production companies. But it is good news for almost everyone else: chemical companies, manufacturers, auto retailers, transportation companies, most other businesses and virtually all consumers.

Lower oil prices translate into lower petrol prices at the pump. (And lower heating bills in some places.) Consumers then take that extra discretionary income to the mall and stimulate the economy.

So let’s do a quick summary. The global economy is soft. Commodity prices are down. The dollar is up. Wage pressures are almost nonexistent. And inflation is MIA.

So why would the Fed start raising rates? Just for the hell of it?

The world’s central banks want to do everything in their power to get national economies revved up before tamping on the brakes.

And with all these disinflationary pressures at work, the Fed may leave interest rates alone through all of 2015... fooling the guessers once again.

This is good news, of course, for the stock market. Low interest rates make it cheaper for consumers and businesses to borrow. It also makes cash and bonds unattractive relative to stocks.

Moreover, one of the oldest saws on Wall Street is “Don’t Fight the Fed.” History shows that bull markets often end within six months of the first interest rate hike.

So if you’re long equities, you want an accommodative Fed. And that’s exactly what we have.

Good investing,

Alex

Editor’s Note: Lower energy prices is one reason Alex has argued we’re on the cusp of a new Golden Age for investors. Yet others disagree. On March 11-14 at the beautiful Renaissance Hotel in St. Petersburg, Florida, he’ll join dozens of analysts to discuss how to profit... either way. It’s all part of the 17th Annual Investment U Conference, our most important event of the year. But you must register by December 15 to claim your early bird discount. For more information, simply click here now or contact Opportunity Travel by email at info@opptravel.com or by phone at 561.243.6276 or 800.926.6575, ext. 104, 105 or 106.

Source: http://www.investmentu.com/article/detail/41436/inflation-why-fed-wont-raise-interest-rates-in-2015#.VIRppU1ya0k

http://www.investmentu.com

Copyright © 1999 - 2014 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in