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It Begins: Barclays Pushes Back Rate Hike Forecast Until 2016, Admits Fed Is "Market Dependent"
Nobody could have possibly foreseen this. Moments ago Barclays' economists Michael Gapen and Rob Martin did what every other sellside "strategist" will do - admit they were horribly wrong about a "strong US recovery", and adjust their first rate hike expectation from September, or less than a month away, until 2016.
From Barclays:
Federal Reserve: First rate hike in March 2016 as financial volatility amid uncertainty in EM pushes out our call
US financial market conditions have deteriorated in recent weeks and the pace of deterioration has accelerated in recent days. Most emerging market currencies have depreciated against the dollar, equity markets in both advanced and emerging market countries have plunged, and advanced economy bond yields are sharply lower, with US 10-year yields dipping below 2%. These moves pushed up the Barclays measure of US financial stress to a level one standard deviation above its long-term average level (Figure 1) and pushed the Barclays measure of US financial conditions lower. Other measures of financial stress have also moved higher. For example, the VIX index is at its highest level since the fall of 2011 (Figure 2).
Although we continue to see economic activity in the US as solid and justifying modest rate hikes, we believe the Federal Reserve is unlikely to begin a hiking cycle in this environment for fear that such a move may further destabilize markets. Instead, we believe the FOMC will delay the start of the rate hike cycle beyond September as a means to offset tighter financial conditions while it evaluates the effect of recent volatility. Many FOMC members will want to see whether the recent moves in financial markets reflect greater weakness abroad than is currently apparent in available macroeconomic data.
In addition to worsening financial market conditions, our decision to delay our outlook for the tightening cycle stems from the effects of a stronger US dollar, lower oil prices, and weak global demand on our outlook for US inflation. The recent move lower in oil will likely weigh on the FOMC as some members had expressed concern over US inflation before the most recent drop in oil prices and further dollar strength attenuates somewhat how quickly core inflation is likely to firm.
Although lower energy and commodity prices are likely to support US economic activity by boosting real household income, we find that the sharp rise in the VIX weighs negatively on activity and employment (see Watch out below! Causes and consequences of a falling US unemployment rate, May 2012). According to our previous research, the VIX can be viewed as a proxy for generalized macro uncertainty and its sharp rise in recent weeks is likely to suppress rates of investment and hiring.
We move our call to for the first rate hike from September 2015 to March 2016. Given the uncertainty around the current global outlook, the timing of the rate hike seems more uncertain than usual. Should this episode of financial market volatility prove transitory, the FOMC could raise rates in December. On the other hand, if the volatility proves durable or reveals greater than expected weakness in global activity, the FOMC may push the first rate hike beyond March. We see a delay past mid-2016 as a relatively low probability at this point given our views on US labor markets. The US has proven durable to shocks emanating from emerging markets in the past, and we believe the current bout of uncertainty to be less pronounced than the successive shocks from developed economies that rocked global markets in 2008, 2010, and 2010.
Translation: the Fed is not data dependent, but it is, as we have said all along, entirely market dependent.
Next up: every other bank, and in the meantime, don't be surprised to see a negative NFP print: after all the Fed will need "some" justification for its massively incorrect and credibility crushing jawboning for a rate hike in 2015.
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"first rate hike from September 2015 to March 2016"
Won't happen then either!
I am sure they'll do it then (wink wink wink)
"rates will never normalize in my lifetime" ~Ben Bernanke
Wrong Ben, your team will lose control of rates.
Lets agree that this is good news for Main St. We finally have some savings in the bank and will now be able to afford a nicer car and a bigger house.
Obama really did pull the wretched Bush economy out of the mud, cleaned it up and made it nice again.
You trust him? Believe he is telling the truth?
(gropes for words) It's happening, we are going to finish green today. Must be the strong "fundamentals". If you see the PPT at the bar tonight and they look exhausted, buy 'em a round. The feat they pulled off today is equivalent to running a five minute marathon.
When milliseconds feel like hours.
ZIRP4EVA
http://www.acme.com/licensemaker/licensemaker.cgi?state=New+York&text=ZI...
They can eat a dick, who still belives in CB's anymore. This has to be over now
Obama will gladly eat dick.. Queer shit packer does not even play golf.
Hey Barclays, I'm still waiting on the rate hikes from Japan to materialize that you told us was coming years ago.
File this under "No shit Sherlock!"..... I wonder what their salary is to state the obvious?
'Although lower energy and commodity prices are likely to support US economic activity by boosting real household income'
It's nice to see the men at Barclays have a sense of humour.
Well, calling it a market is really not telling the truth, that there is no market.
I went to the doctor and he gave me 6 months to live....
I couldn't pay my bill so he gave me another 6 months!
egad they're full of crap
Bunch of wazacks.
DavidC
Thaaaaaaat's a shame.
The Fed will do nothing.
What you talkin bout Willis?
Fed is market dependent?
How about market is Fed dependent!
The perfect circle jerk, and dem's just de guys to jerk it.
Any interest rate raise will hit so many markets, the reality is not worth contemplating, every facet of financial sector knows it, that includes the subserviant yellow-belly politicians and the government. Banks sitting on trillions of derivatives(which are sensitive to rate rise) will have their cojones ruptured. Companies playing the share-buy-back game, will also feel a kick in the gonads, as their entire share-buy-back lunacy is based on ZIRP. Many over extended citizens, who can just about afford their mortgage at today’s housing bubble prices, will be fucked if the interest rate rises. I personally placed my "Buy-to-lets" on 10 year fixed rate, simply because I do not want to be caught with my pants down when the shit hits the fan, but at 2.99% fixed I simply could not refuse the deals at the time. We all know rates must rise at some point, the answer is when. Due to the fact there is no functioning market governed by market forces, those with the printing presses can delay and pray, as well as extend and pretend. All Zero hedgers can do is prepare for the inevitable. Hoard that affordable(subsidized courtesy of the market riggers)silver in large amounts, the tiny amounts of gold we can afford, sit back and wait.
Monetary deflation wipes out Fractional-Reserve bankers, who must have enough money tomorrow to pay today's debt plus interest.
Monetary inflation saves their book at the cost of much of its real value.
Central Bankers are bankers.
What do you think they'll choose?
The FED SHOULD rise rates right away, right now, TODAY if possible.
Any negative effect of a rate hike would be lost amongst the turmoil of the market decline.
They are missing a golden oppurtunity, what fools they be.