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FOMC Minutes Suggest September Rate Hike Despite Global Turmoil
Since The FOMC's supposedly dovish June meeting, bonds have outperformed stocks rather notably and crude has crashed. The crucial aspect for the Minutes is the balance they struck between market turmoil overseas (dovish) and the domestic economic and housing recovery (hawkish) as to how that fits with an expectation for a 'gradual' post-September lift-off...
- *FOMC SAW CONDITIONS STILL APPROACHING THOSE WARRANTING LIFTOFF (dovish)
- *ONE MEMBER READY TO RAISE RATES IN JUNE BUT WILLING TO WAIT (dovish)
- *MANY FED OFFICIALS EXPRESSED CONCERN ABOUT GREECE AT JUNE FOMC (hawkish)
- *SEVERAL OFFICIALS VOICED UNCERTAINTY ABOUT CHINESE GROWTH PACE (hawkish)
With macro data having beaten expectations since then, the last best hope for stocks is that global turmoil picks up (as it has in Greece) to keep The Fed on hold (as they remain cornered to regain some ammo before the next 'event' happens). As SF Fed's Williams notes today the "safer course" for raising rates would be to start sooner and proceed gradually.
Pre-Minutes: S&P Futs 2052, 10Y 2.233%, EUR 1.1050, Gold $1163
Further headlines:
Hawkish
- *MOST SAW OIL PRICE STABILITY BOOSTING INFLATION CONFIDENCE
- *FED OFFICIALS GAVE A NUMBER OF REASONS FOR CAUTION OVER OUTLOOK
- *MANY OFFICIALS WANTED MORE SIGNS OF STRONGER GROWTH FOR LIFTOFF
Dovish
- *MANY FED OFFICIALS EXPRESSED CONCERN ABOUT GREECE AT JUNE FOMC
- *FED OFFICIALS GAVE A NUMBER OF REASONS FOR CAUTION OVER OUTLOOK
- *A NUMBER OF FED OFFICIALS WARNED AGAINST PREMATURE RATE RISE
- *SOME OFFICIALS SAW RISK WEAKER 1H GROWTH COULD RESTRAIN SALES
Since The June meeting...
And here is why anyone hoping the "dots" will push liftoff in September or December will be disappointed:
During their discussion of economic conditions and monetary policy, participants commented on a number of considerations associated with the timing and pace of policy normalization. Most participants judged that the conditions for policy firming had not yet been achieved; a number of them cautioned against a premature decision.
Stocks were higher on June 17 tthan they are now, so...
Also, wage growth, or lack thereof:
Many participants emphasized that, in order to determine that the criteria for beginning policy normalization had been met, they would need additional information indicating that economic growth was strengthening, that labor market conditions were continuing to improve, and that inflation was moving back toward the Committee’s objective.
And yet:
Many expected that labor market underutilization would be largely eliminated around year-end if economic activity strengthened as they expected.
But it gets worse: for the first time the Fed is actually worried about its credibility:
Other concerns that were mentioned were the potential erosion of the Committee’s credibility if inflation were to persist below 2 percent and the limited ability of monetary policy to offset downside shocks to inflation and economic activity when the federal funds rate was at its effective lower bound."
And here is why this is bad:
Inflation had been well below the Committee’s longer-run objective, but, with oil prices and the foreign exchange value of the dollar stabilizing, members expected that inflation would gradually rise toward 2 percent over the medium term.
May want to hit F5 there...
And finally, Greece:
- Several mentioned their uncertainty about whether Greece and its official creditors would reach an agreement and about the likely pace of economic growth abroad, particularly in China and other emerging market economies.
- many participants expressed concern that a failure of Greece and its official creditors to resolve their differences could result in disruptions in financial markets in the euro area, with possible spillover effects on the United States.
- The rise in yields was also supported by the release of some stronger-than-expected inflation data in the euro area and by European Central Bank communications that volatility in yields was to be expected. Against this backdrop and with a step-up in concerns about developments in Greece, equity prices declined in most countries.
That's the bad news. In mid-June there was some good news on the stock front...
Stock prices in Japan and especially in China were the main exceptions.
... the Fed may want to hit F5 on that too.
* * *
Full Minutes below...
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zerohedge, please explain how the FED is going to pull if off.
Ignore the minutes. They're either crazy or are soon find out they're crazy.
Do it Yellen, have some balls!
What I said!
THE FERAL RESERVE WILL RAISE RATES NO MATTER WHAT!
DAMN THE TORPEDOES.. FULL RATE HIKE AHEAD!!
At what interest rate would the US Government have to cut off EBT cards and Social Security payments?
Cut the EBT and let the Riots begin.
Considering how much of the Treasury market the FED now owns, I would think a small uptick in rates cannot be that injurious. They already hold over a third of outstanding treasuries. Any uptick in rates only affects new debt. I would think the worst effects would be a few years out when more of the privately held short term debt from Operation Twist comes due. I believe I'm correct in assuming that Operation Twist significantly distored the treasuries market by pushing so much short term debt into private hands.
Am I misunderstanding the implications???
They are just trying to stay relevant. It's funny how they always have to issue inane statements when shit is going down to justify their worthless existence.
Seriously, Blah Blah Blah, we will raise rates in Sept, then come Sept "we can't raise rates" its getting a bit old.
The truth would read FOMC Minutes Suggest September Rate Hike Because Global Turmoil
In hindsight it will seem they waited until the cusp of the recession, just so they wouldn't be caught at zero when the correction starts.
Now if they don't raise in September, I think the whole thing goes full retard and price discovery and everything else that is a part of a legitimate market economy finally goes completely bye-bye. I think that would be the beginning of a pretty precarious world.
Damn right, they're crazy. They are only worried whether they are counterfeiting enough for the banksters.
The Fed is cryin' WOLF again.
They can't raise rates.
but their rumors serve as trim tab control for the market....
China bans sizeable holders of stock from selling for 6 months.
Desperation
That should really increase volume as the big holders start selling tiny bits daily.
IMO, Yellen secretly desires to be viewed as the Fed Czar that tried to stop the ZIRP of Bernake. They worry what textbooks will say about them in the future.
Not sure if she will be successful. There are powers much bigger than she. She has strings too.
With the world sliding towards chaos, she'll likely be the fiddler while Rome is buring.
Fiddler you say? So, she does have some sorta talent?
http://www.youtube.com/watch?v=CD_hAujgt0A
FOMC = F Over Middle Class
Some words to ponder...
The leftist is anti-individualistic ... He is not the sort of person who has an inner sense of confidence in his own ability to solve his own problems and satisfy his own needs."
Ted Kaczynski
Let's cut our dependence upon the FOMC and the FED.
zerohedge @zerohedge 2m2 minutes ago
FOMC SAW CONDITIONS STILL APPROACHING THOSE WARRANTING LIFTOFF
After all these years at a miniscule rate of interested and only still approaching lift off?!
THERE IS ZERO FUCKING CHANCE THE ASSHOLES AT THE FED RAISE RATES COME SEPTEMBER. ZERO!!!
THESE ASSHOLES WILL NEVER RAISE RATES, BECAUSE THEY FUCKING CANT.
Yeah we know the world is on fire, so here's some fuel and a match.
Psy-ops and propaganda, period.
LOOK! Ain't the Unicorns Awesome?!?!?!?!
Yep, then in September they can tell us they will raise rates in June.
Then in June say raise in September.
And then............
See a pattern?
pods
Maybe in September they'll tell us that they did raise them in June but there this glitchamabobajiggie thing that well ..... kinda like shaking it more than twice ....
QE by Sept. more likely.
Odd, considering Greece doesn't matter...
I THOUGHT THAT GREECE AND EVERYTHING ELSE IN THE WORLD IS "TRANSITORY"? Come on FED, make up your mind!!! Stop baffling us with all the bullshit.
I would like to shove their rate hike right up fat Yellen's ass.
No rate normalization in my lifetime.
~~The Bernank
Thank you for that reminder, Doc.
Uncompelling. He could be dead in August.
One word: Japan.
I triple dare them. Do it. DO IT!
Perfect timing for liftoff if you want to crash things.
F ucked
O ver
M iddle
C lass
Fuck you art cashman and Liesman.
*FOMC SAW CONDITIONS STILL APPROACHING THOSE WARRANTING LIFTOFF (dovish) Bullshit, they have been saying this for years.
https://www.youtube.com/watch?v=7rmbiuEDKJU
FED bullshit is getting very old now. No way in hell they raise in the typhoon that is coming.
Makes you wonder what sort of 3 diminsional chess they think they are playing by suggesting it on a day when the furies are barely contained (and the day ain't over yet..).
Fuckin' Yellin yelling 'no fire' in a movie theatre full of smoke.
Ooh Triple Rainbow
Fuck you Yellen, you clueless albino stooge!
Some one had to say it.
stooge, that is dead on!
They continue the farce. And there are people who still take these jokers seriously. They will play the "one day will raise rates" forever until they will coma out and start a new full time, overboard money printing. All the signs everywhere are pointing to a failing economy in Europe, China, Canada latest which is so dependent on the USA, and more or less all other countries. So dont tell me the the USA are doing fine. Please can you find a country where the economy is expanding? Let me know.
Translation:
"We have no idea what the real economy is doing because all the statistics are fake and we dwell in such lofty ivory towers. The BIS is leaning on us to raise rates for unclear reasons, possibly something to do with the credibility of the USD, possibly something to do with historically unprecedented systemic risk due to the obscene malinvestment we've fostered. We are having a tough time accepting that our monetarist, quasi-Keynesian gospel is operating contrary to expectations. We've fucked up and don't know how to admit it yet."
Bullish on global turmoil.
Conditions for First Hike of 2015 are closer to First Cut of 2001/2007.
One and Done, If At All
Except for goal-seeked data products, the turmoil is not only foreign but also domestic.
I believe they know this in the Eccles building, though they deny that the official data reflects anything but the unvarnished truth.
Under what circumstances would they raise rates anyway, when they know all the *real* data says no? And raising rates will create a cash crunch amongst the still-overleveraged finance industry? And they know the cash crunch will translate to a collapse in money velocity?
I can only think of two circumstances in which they'd do that:
1) Cognitive Dissonance
2) Intentional Crash of the World Financial system
The smug, self-importance of all these bureaucrats is absolutely nauseating, not to mention the vainglory of their minion scribes.
Forget Greece.. It was a bad deal ever since the end and WWII when a strong Communist Paty movement formed their.. and then they got shafted, and never recovered. they will find their way out by applying the real meaning of sovereignty , that is the real means of self governing is to have self-seficency in the basic in place. Russia is doing this and Greece should follow and have a dual currency availed.
The US has a long way to go, as debt reliance is a total governmental addiction that has to stop suddenly and only a FED rate hike will do that.
Thr next step will be by the US congress, the elimination of the tax deduction for US Bonds and then the repatriation of US Bonds as taxable income.
The only thing "lifting off" is the toilet bowl seat,as Janet Yellen plops her skanky ass on the crapper,and takes another dump on what little is left of Amerika..
"Many expected that labor market underutilization would be largely eliminated around year-end if economic activity strengthened as they expected."
That's a good one. There are literally tens of millions of unemployed or under-employed people. 2/3rds of the productivity-enhancing STEM workforce is underemployed. Yet they think that we're on the verge of eliminating "labour market underutilization"?
Wow.. Just wow..
For the record let me state my utter certainty that September will come and go without a rate hike.