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Rates 'Liftoff' Getting Closer, Goldman Warns

Tyler Durden's picture




 

Recent comments from FOMC participants on the forward guidance and the appropriate timing of the first hike of the fed funds rate suggest, Goldman warns, a greater clustering of FOMC participants' views around a mid-2015 'liftoff' in rates. Similarly, private sector forecasts for the first hike are becoming more centered on mid-2015 rather than August to September.

Via Goldman Sachs,

In today's note, we review recent comments from FOMC participants on the forward guidance and the appropriate timing of the first hike of the funds rate in advance of next week's September meeting.

With respect to the forward guidance, both Cleveland Fed President Loretta Mester and Boston Fed President Eric Rosengren expressed discomfort with the FOMC's current calendar guidance last week. President Mester expressed concern with the FOMC statement's guidance "that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends," which Philadelphia Fed President Charles Plosser dissented against at the July meeting. She argued that the forward guidance should instead be calibrated to distance from the Fed's goals and the speed at which progress is being achieved. President Rosengren likewise argued that as the economy approaches full employment, the Fed should stop providing calendar guidance.

With respect to the appropriate timing of the first hike of the funds rate, recent comments point to a greater clustering of FOMC participants' views around mid-2015. In particular, one or two FOMC participants (namely, Presidents Lockhart and Rosengren) have likely pulled forward their views on the most appropriate date for liftoff; there is nothing to indicate that those previously expecting a mid-2015 hike have moved; and the more hawkish participants have also likely stayed in place. Exhibit 1 lists participants' recent comments that are most relevant to the outlook for the funds rate.

We highlight the views of some participants below:

Atlanta Fed President Dennis Lockhart seems to have pulled forward his view somewhat from the "second half" of 2015 to "mid-2015." While it is possible that he did not intend this change of wording as a deliberate sign of a shift in view, it follows a similar transition made earlier in the year by San Francisco Fed President John Williams.

 

Boston Fed President Eric Rosengren, a likely 2016 dot in June, has consistently maintained the view since April that the first hike should come when the Fed is about one year from achieving its employment and inflation targets. However, the improvement in the data has likely been somewhat faster than he initially expected, and his recent comments suggest he is likely to move forward to 2015.

 

Chicago Fed President Charles Evans identified himself in July as one of the 2016 dots in the June Summary of Economic Projections. He seemed to indicate that he had maintained that view, although this might have changed in the last two months.

 

Presidents Lockhart and Williams have both said that their mid-2015 timing puts them in agreement with Fed Chair Janet Yellen.

 

Among more hawkish participants, President James Bullard prefers March 2015 and President Richard Fisher has mentioned "early next year." While President Charles Plosser has argued that the funds rate should have already increased and President Esther George has expressed at least partial agreement, President Jeffrey Lacker has said he does not think the Fed is "behind the curve."

 

While not indicative of any recent change of view, comments from last week by Governor Jerome Powell and April comments by Governor Daniel Tarullo suggest both might hold somewhat more dovish views than is usually assumed.

 

Governor Lael Brainard will submit projections for the first time, which could slightly reduce the average and median dot if her policy views are similar to those of the leadership.

Similarly, private sector forecasts for the first hike--recorded in a monthly Wall Street Journal poll--became more centered on mid-2015 from August to September, as shown in Exhibit 2.

While strong data likely led some forecasters to shift their expectations to Q1 of 2015 in the August poll, the weaker-than-expected August employment report likely caused a shift back in the September poll.

 

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Fri, 09/12/2014 - 15:15 | 5211829 ekm1
ekm1's picture

My guess of pre-planned sacrificial lambs:

 

- Barclays

- Deutsche bank

 

A minimum of $10 trillion to be extinguished, mainly from billionaires with money offshore.

 

We'll hear about few other maddoffs

 

TRIPLE LEHMAN

Fri, 09/12/2014 - 15:18 | 5211876 Dr. Engali
Dr. Engali's picture

Nope. Douche bank and BofA are both doomed. There is no way they allows Barclays to go under.

Fri, 09/12/2014 - 15:18 | 5211881 ekm1
ekm1's picture

No objections

 

Sat, 09/13/2014 - 00:24 | 5211968 zaphod
zaphod's picture

The only thing we know for sure is it won't be Goldman.

Fri, 09/12/2014 - 15:21 | 5211892 Grande Tetons
Grande Tetons's picture

I reckon if DB goes down the drain...the next dominoes will not matter too too much.  Kinda like arguing over who farted at a chili cook off. 

Fri, 09/12/2014 - 15:28 | 5211930 seek
seek's picture

Agreed, DB and BofA have been at death's door for a long time. Barclays is protected because of throwing the life preserver to Lehman's remnants.

Fri, 09/12/2014 - 15:24 | 5211912 thunderchief
thunderchief's picture

This is like watching a bad porn where the guy just keeps going and can't finish.

Finally he's just plain masturbating and even then he has no luck.

How can anyone listen to or watch this nonsense anymore?

Fri, 09/12/2014 - 15:26 | 5211922 madcows
madcows's picture

you watch porn for the guys?  Duuuuude?!

Fri, 09/12/2014 - 15:32 | 5211938 ekm1
ekm1's picture

Which part of 'do not read my comments' is not clear enough?

 

And on a consensus from readers, I can stop commenting, no issues with that at all.

This is just a hobby for me

Fri, 09/12/2014 - 15:37 | 5211956 ekm1
ekm1's picture

Let me know kiddies.

I can stop commenting.

No problem at all

Fri, 09/12/2014 - 15:42 | 5211987 Grande Tetons
Grande Tetons's picture

Keep posting. 

Fri, 09/12/2014 - 15:48 | 5212010 hobopants
hobopants's picture

Keep it up dude, good to hear a fresh perspective. 

Fri, 09/12/2014 - 16:14 | 5212085 Jugdish787
Jugdish787's picture

Keep commenting, I enjoy your point of view.

Fri, 09/12/2014 - 17:22 | 5212272 financialrealist
financialrealist's picture

Always good to hear different perspectives. I think 99% of the ZH's out there have been proven wrong over the last few years. Including myself .

Fri, 09/12/2014 - 16:14 | 5212084 F0ster
F0ster's picture

We're the fluffers here on ZH

Fri, 09/12/2014 - 15:42 | 5211982 AGoldhamster
AGoldhamster's picture

SnP > 3000 - and many many moons ekm repeating his wildest dreams until finally he's again falling of his chair.

One of ekm's wildest imaginations

Vote - what comes first!

Fri, 09/12/2014 - 15:43 | 5211991 ekm1
ekm1's picture

S&P at 3000 only if USD collapses as world currency.

 

I can stop commenting. Commenting on ZH is a hobby, for pleasure.

If people don't find this entertaining, no problem, I'll respect the people and I'm out

Fri, 09/12/2014 - 16:51 | 5212210 AGoldhamster
AGoldhamster's picture

entertaining - oh yes it is!

Fri, 09/12/2014 - 15:46 | 5212002 WillyGroper
WillyGroper's picture

ekm1, RE: madoff's

according to professor kortikoff, boston u,  the SIPC is just another avenue for asset confiscation. 4 new madoff's every week on WS is a dead give away.

i really think you're spot on. 

 

Fri, 09/12/2014 - 15:49 | 5212006 AGoldhamster
AGoldhamster's picture

If DB goes - DAX goes.

No way ever to happen.

 

So seems BofA is left.

BTW why not RBS? Who is responsable for bailing out RBS - UK or ... wait .. independant .. Scottland?

Fri, 09/12/2014 - 16:31 | 5212143 Everybodys All ...
Everybodys All American's picture

RBS is most certainly a candidate along with all the other zombie banks. Pick one in Ireland.

Fri, 09/12/2014 - 16:20 | 5212081 Everybodys All ...
Everybodys All American's picture

I would add a US bank and a Japanese bank. There is no way if those two Barclays and DB go away that there would not be major worldwide contagion. Give me Citi and JP Morgan in the US and in Japan I'll select Mitsubishi Financial for the ash heap.

Fri, 09/12/2014 - 16:27 | 5212134 malek
malek's picture

BS.

If Deutsche Bank goes, Germany will experience something close to another Waehrungsreform: economic implosion and vast savings losses of the people.
The billionaires would take a few scratches at most.

That would not be taken lightly by them and drive them out of the Euro and away from the US into either some kind of neutrality or the arms of Russia.

Fri, 09/12/2014 - 16:28 | 5212142 BadDog
BadDog's picture

If Germany lets big D go, it will telegraph that the industrialist have won and Germany will flip East. Germany, Russia and China. Now there's a nightmare scenario that should keep London and Washington awake at night.

Fri, 09/12/2014 - 16:38 | 5212180 Jumbotron
Jumbotron's picture

The interest rate rise is the rocket motor.......

The rocket is the American economy.....

Here's what happens when rates rise......

https://www.youtube.com/watch?v=m6qJh9upqW8

Fri, 09/12/2014 - 15:13 | 5211836 tawdzilla
tawdzilla's picture
"Rates 'Liftoff' Getting Closer, Goldman Warns"

I call bullshit

Fri, 09/12/2014 - 15:51 | 5212013 Citxmech
Citxmech's picture

"Tomorrow, tomorrow, (they'll raise rates) tomorrow

(It's) always a day away."

Fri, 09/12/2014 - 15:53 | 5212023 AGoldhamster
AGoldhamster's picture

Dead wrong - 120 USDJPY and 1.20 EURUSD within (few) months.

Fri, 09/12/2014 - 15:12 | 5211837 Grande Tetons
Grande Tetons's picture

Governor Lael Brainard will submit projections for the first time, which could slightly reduce the average and median dot if her policy views are similar to those of the leadership.

The median dot could be lower! Oh my fucking God!!! Help me!!!! 

Fri, 09/12/2014 - 15:22 | 5211899 Cangaroo.TNT
Cangaroo.TNT's picture

Does anyone else think this is abosfuckinglutely idiotic? Oh no!  The first rate increase is expected a whole 1 to 2 months before prior projections!  What are we to do?  All our other projections and prognostications have been so incredibly accurate and reliable!  After only 7 years of ZIRP we couldn't possibly have our first rate increase a whole 1 to 2 months sooner than expected!  Maybe 15 or 20 minutes, but goodness we would never handle 1-2 months.  We've only had 7 years!  IT'S ONLY BEEN 7 YEARS!!!

The fucking stupid cunts at GS should be embarrassed and humiliated after publishing this drivel. Jesus H Christ am I the only person that still considers August-September to be "mid year"?  It's still fucking convertible driving weather for fuck's sake.

Fri, 09/12/2014 - 15:44 | 5211989 disabledvet
disabledvet's picture

Hey Fed Phuckers...WHERE'S THE RECOVERY?

We already know who the Bailout Tycoons are...

Fri, 09/12/2014 - 15:11 | 5211841 farmboy
farmboy's picture

GS to muppets. Please sell your long dated bonds, the us economy is doing great and improving like Japan after 24 years of QE. If you sell to us we will charge you a low fee for that :)

Fri, 09/12/2014 - 15:36 | 5211960 scraping_by
scraping_by's picture

Oh, yeah. Plus, all the HFT algos will be set on 'sell' and drive each other over the cliff. Is the Vampire Squid heavily short?

Fri, 09/12/2014 - 15:11 | 5211842 semperfi
semperfi's picture

What a crock of shit!  If rates rise the whole thing blows up.  MAJOR BLUFF !!!  They'll come up with a lame-ass excuse at the last minute why they can't raise rates (again).  I can't believe anyone belives this shit.  Amazing.

Fri, 09/12/2014 - 15:15 | 5211860 Grande Tetons
Grande Tetons's picture

But but but but...this time they are talking about dots!!! Lower dots!!!! Do you know what that means?????? Fucking dot bastards are going to get us all!!!! 

Fri, 09/12/2014 - 17:07 | 5212248 financialrealist
financialrealist's picture

Agreed. Have to keep up the charade to keep the bubble going Go back to 2011, before euro crisis, projections has us at a 3 handle at this point

Fri, 09/12/2014 - 15:13 | 5211849 himaroid
himaroid's picture

I will be averaging in. Keep it coming assholes.

Fuck goldman and tepper.

Fri, 09/12/2014 - 15:14 | 5211856 FuzzyDunlop21
FuzzyDunlop21's picture

2015? Shiiiiiit we will all be dead from Ebola by then. So party the fuck on and BTFD!!!!!!!!!!!

Fri, 09/12/2014 - 15:45 | 5211998 disabledvet
disabledvet's picture

Ebola is deflationary...

Fri, 09/12/2014 - 15:17 | 5211866 Yen Cross
Fri, 09/12/2014 - 15:47 | 5212005 himaroid
himaroid's picture

HA! 

They will not let rates rise enough to let the tbond shorts cover. When rates begin to drop again, tbonds longs will reap it when the shorts panic and capitulate.

Fri, 09/12/2014 - 15:17 | 5211867 Dr. Engali
Dr. Engali's picture

Put In other terms: Goldman wants your bonds so please sell them to us at a discount you fucking muppet.

Fri, 09/12/2014 - 15:25 | 5211917 madcows
madcows's picture

Right.  FED raises rates, stocks crater, everyone jumps into bonds, rates go down.

Or, Goldman plans to sell all stocks and buy bonds.  Thus, goldman puts out a scare note, rates go down, goldman sells their stocks, buys bonds, and Muppets get anally raped, again.

Fri, 09/12/2014 - 15:17 | 5211874 i_call_you_my_base
i_call_you_my_base's picture

"Therefore, sell us all your bonds."

Fri, 09/12/2014 - 15:21 | 5211889 Jim Shoesesta
Jim Shoesesta's picture

GS says $2000 an ounce gold and 180 a barrel oil.  opps, never minds.

Fri, 09/12/2014 - 15:26 | 5211915 papaswamp
papaswamp's picture

If the Fed isnt careful it will be chasing rates instead of dictating them.
Plus whom ever is exposed too much to housing market will be shit out of luck. Rate rises kill that market brutally quick, even at these epically low rates.

Fri, 09/12/2014 - 15:26 | 5211923 lester1
lester1's picture

Dont you think if the Fed could raise rates they would have done so already?? Its all a bluff and its amazing how sheep investors believe the Fed's lies.

Fri, 09/12/2014 - 15:31 | 5211934 sdmjake
sdmjake's picture

This Jerome Powell can eat a bag of dicks. He has been "looking at a wide range of [inflation] indicators" but 'doesn't see the likelihood' of that.

What planet were you looking on, Jerome? Over the last five years the cost of FUCKING EVERYTHING I pay for has gone up.

{Note* - Yes, I realize that rising prices are just a 'Symptom' of inflation but these guys consider that symptom the actual disease}

Fri, 09/12/2014 - 15:32 | 5211942 Amish Hacker
Amish Hacker's picture

A lot can happen between now and mid-2015, most of it completely unforseeable. Are we really supposed to believe that the same people who thought it was brilliant strategy to add 4 trillion to the Fed balance sheet can now make accurate predictions about interest rates nine months out?

Fri, 09/12/2014 - 15:34 | 5211950 Spitzer
Spitzer's picture

Remember trader Dan Norcini ? He's a convert. He now worships at the altar of Keynesiansm.

Fri, 09/12/2014 - 16:38 | 5211952 FieldingMellish
FieldingMellish's picture

"Goldman warns"... comedy gold.

Fri, 09/12/2014 - 16:46 | 5211981 hotrod
hotrod's picture

Wait a minute   I thought it was first quarter 2015.  Seems the narrative has changed to   It was late 2015  but now maybe mid 2015.  That is not what was said by one of the Fed governors.

Fri, 09/12/2014 - 15:45 | 5211995 hotrod
hotrod's picture
Bullard Predicts Fed Rate Increase in First Quarter of 2015

http://www.bloomberg.com/news/2014-06-26/bullard-sees-fed-raising-rates-...

 

Thought I saw that somewhere.  Here is the headline.   Keep danglin the carrot.  Come mid 2015 it will be said it looks like 1st qtr. 2016.  Japan couldn't do it we sure cant.

Fri, 09/12/2014 - 15:45 | 5211999 kchrisc
kchrisc's picture

In the physical world, "That which goes up, must come down."

In the bankster world of theft, "That which goes down, must go up."

An American, not US subject.

 

"In fraudulent-reserve banking poverty, misery, and guillotines are the entropy of the system."

Fri, 09/12/2014 - 15:55 | 5212027 nakki
nakki's picture

And when you they say liftoff they're talking about 1-1.25% tops. 

Fri, 09/12/2014 - 15:58 | 5212044 ebworthen
ebworthen's picture

C'mon Janet, 5% prime rate middle of October!

You can do it!  This economy has wings!

Fri, 09/12/2014 - 16:31 | 5212147 dumbStruck
dumbStruck's picture

Rate rise = hammer blow to wood stake held over vampire market heart.
On First hit very scary moment, count wakes up with blazing eyes and bared fangs.
Second hit... ?

Fri, 09/12/2014 - 18:16 | 5212411 Otrader
Otrader's picture

After sending out the 'liftoff' news...the staff at Goldman got into their luxury sedans and off to the Hamptons.  I hope everyone of them drowns this weekend there.   Nothing good for mankind has ever came from these thieves. 

 

F U GSCo!!!

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