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Goldman Maps Fed's "Flight Path", Sees Steeper Trajectory For Rates
On Tuesday, we got the latest egregious example of regulatory capture with the appointment of Neel Kashkari to the Presidency of the Minneapolis branch of the Eccles cabal. Here’s what we said:
At a certain level, the staffing of government agencies, regulators, and other public sector bodies with former Wall Streeters and various bulge bracket bigwigs has become so ubiquitous that it’s hardly even news.
Still, it’s worth paying attention to the dynamic because losing track of who’s really running things is a bad idea if you want to understand why it always seems like regulatory outcomes are never commensurate with the crime and if you think monetary policy and all types of other high level decisions regarding the economy are conducted at the behest of those who are ultimately beholden to the bankers.

Note once again that all three new regional Fed Presidents appointed this year have at one time worked for Goldman and now, four of the five regional Fed presidents voting in 2017 will be Goldmanites.
So for those interested to know where rates are headed now that Janet Yellen has put herself and the rest of the FOMC in a position where they at least have to try to hike (and no, they probably don’t have anything left in terms of credibility at this point, but we suppose you still have to think that we’ll see some manner of effort to normalize otherwise, why even bother meeting), just ask Goldman, who’s out today with an explanation of why rates are likely to rise faster than the market thinks.
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From Goldman
The market discounts that the Fed Funds rate will be at around 85bp by December 2016, implying an additional two hikes in the next calendar year. More interestingly, the forwards discount that in 2017 the pace of rate hikes will slow to a cumulative 50-75bp, leaving policy rates just below 1.5% by December 2017.
Our US Economics team’s modal forecast calls for 100bp cumulative hikes during 2016 (Fed Funds would end the year at 1.4%) and a further 100bp tightening during 2017 (at the end of which Fed Funds would stand at 2.4%). The gap between our baseline projections and the forwards grows over time (around 40bp at end-2016, 80-90bp at end-2017, over 100bp by end-2018, as shown in Exhibit 1).
One of the main reasons why we see a higher trajectory for policy rates is that, with the economy expected to continue to expand faster than its 1.75% potential rate of growth, pressures on wages and core inflation (particularly in services components) will build, as illustrated in Exhibit 2. The market, however, does not appear to be pricing this.
Core CPI inflation is already trailing just below 2% at an annual rate, with the persistent price dynamics in service ex-energy category contributing 210bp to the readings. Yet, US inflation swaps price annual inflation rate at around 1.0% by December 2016, climbing to 1.6% in both December 2017 and 2018.
Based on the current forward curve for crude oil, this tells us that the market is either pricing that underlying core inflation will decelerate or that the distribution of risks around the inflation outlook is skewed to the downside. The inflation option market would support the latter interpretation: the market currently assigns around a 35% probability to a scenario in which US CPI inflation averages less than 1% over the next 5 years.
In both cases, the market prices that policy rates will at best hover close to zero in real terms over the coming three years. If we take our US Economics team's projections for headline CPI over these same horizons, which are 60-80bp above the inflation forwards, and subtract them from the market-implied path for Fed Funds, real policy rates are set to be negative to the tune of 80-100bp by end-2017.
Given where the US economy is now and where we think it is heading, we find it hard to believe that real policy rates will be zero in two years' time, let alone negative 1%.
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Basically, Goldman is expecting a hockeystick inflation miracle which will prompt the very "data dependent" Fed to hike 200 bps by the end of 2017 after having not hiked in a decade.
Of course Goldman would be correct that inflation is likely to remain far higher than the market "thinks", because as long as rates are still low on a historic basis, and as long as the rest of the world is still engaged in all manner of ludicrous Keynesian experimentation with negative rates and equity monetization the world's ultra rich will continue to buy their $100 million real estate and their Modiglianis, inflating asset bubbles of epic proportions. But when the Fed and other DM central planners look at inflation, they tend to purposefully leave out all signs out it and then use the lowballed figure to explain why still more easing is necessary.
So who knows, especially now that the new reaction function explicity includes financial markets both foreign and domestic which means that it's no longer clear to investors what they should be pulling for: a hike which telegraphs a positive assessment of the economy but tighter policy, or a hold, which telegraphs a less sanguine assessment but portends more ZIRP. In short, no one has any idea whether bad news is bad news or bad news is good news or good news is... You get the idea.
It's enough to make you throw up your hands (or pull out your hair) but we suppose going forward (or at least beginning in 2017), we can just look at what Goldman thinks and assume that's where the Fed is heading. Then again, that's always been the case.
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More lies from Goldman to keep dollar strong and gold and oil weak.
Goldman has also guaranteed an expansion for the next 4 years.
If I had a dollar for every lie Goldman tells, I would be a billionaire like Blankfein
Who says crime does not pay?
Boris is map "Fed's Flight Path":
QE ---> NIRP ---> ZIRP ---> Crapper
Of course, like Metro plane explode in sky, WWIII may prevent completion of flight plan.
Cash-Carry looks evil.
What is wide-eye crazy man? Is like hybrid cross of Barry Soetoro and Yul Brenner.
* Little known fact, "King-and-I" movie star is Russian-born actor Yuli Borisovitch Briner. Is also Pharoh Rameses in epic Ten Commands of Cecile B. Demille, who is actually not Jewish.
Yuli Borisovitch Briner was one handsome comrade. I bet he was swimming in poon back in the day.
It is in his contract that he always said "Where there is one, there will be many"....
Cash-Carry looks evil.
I'd say he looks like someone I'd want to punch in the face. Hard. Really, really, hard...
As soon as they get as the shipment of the new and improved fairy dust it'll be utopia for everybody forever......
So..."pressures on wages and core inflation ... will build,....The market, however, does not appear to be pricing this." Well, let me laugh a bit about there being a "market" in the first place, but the whole "pressures on wages" thing, seems to me that Goldman f*cktards don't seem to understand that their slimy breed of filth are the only ones seeing their wages increase, maybe that's why the "market" isn't prcing it in - they're not as delusional and self-absorbed as Goldman f*cktards.
Given where the US economy is now and where we think it is heading, we find it hard to believe that real policy rates will be zero in two years' time, let alone negative 1%...
I LOVE IT, another squid classic. i gotta save that in my dudley-yellen quote files.
1oz Silver American Eagles €12 @ EurGold
https://www.eurgold.eu/silver/silver-coins/american-eagle-1oz-silver-coi...
Kneel Dow and Carry the Cash.
Portrait of a Bag-Man's rise to power.
Nice advice for GS Muppets, but there isn't a snowballs chance in hell this happens for 2 reasons; , 1) you think the Fed is going torpedo Cankles chances of being President with libtard DEMS running the country the last 8 years, and 2) where is the fucking growth in the economy to rationalize these rate hikes? And I didn't even mention the impact on the 20 trillion in debt this would affect.
www.traderzoo.mobi
@Vegas - you ask where is the growth in the economy?
The BLS diffusion index for total private employment was at 61.8 in October, up from 53.4 in September. For manufacturing, the diffusion index was at 51.9, up from 37.5 in September. Las Vegas: On Pace for Record Visitor Traffic in 2015; Conventions Returning (people have money to gamble) Residential Property Values Increased 6.1% Y/Y in September according to FNC Large Home Builder Results Q3/2015 Up 9% That's where your growth in the economy is coming from. I don't believe it either but when you get numbers from various non-governmental agencies saying things are looking good then you've got to start asking Who is working, who is going to Vegas and who are buying homes at ridiculous prices? But someone is. Read more at http://www.calculatedriskblog.com/#swO4hRSgXBVduIJv.99Goldman tends to publically communicate the exact opposite of what will actually happen. Stopler. Muppets.
Retards 'r' us = Jan Hatzius (born December 17, 1968) is the chief economist of investment bank Goldman Sachs
Don't worry, scrote. There are plenty of 'tards out there living really kick-ass lives. My first wife was 'tarded. She's a pilot now... [/Doctor, Idiocracy]
Does she earn a living flying crop-dusters, or off your Palimony payments?
BS! Wur in Deflation and the world economy is collapsing.
WORLD ECONOMY COLLAPSING - OCTOBER http://forum.prisonplanet.com/index.php?topic=100571.msg1577221#msg1577221
DEFLATION STARTED! - OCTOBER http://forum.prisonplanet.com/index.php?topic=80429.msg1559610#msg1559610
DEFLATION STARTED! - NOVEMBER http://forum.prisonplanet.com/index.php?topic=80429.msg1577364#msg1577364
Bullshit!
What demon is possessing Neel?
Maybe he should start hunting for his soul before it is too late.
The Silent Scream Of Crashing Stocks - Dave Kranzler
http://thenewsdoctors.com/?p=538630
I can see it now, its 2018 1 years are trading at 3%, 10 years at 4% and the US is adding 600 to 800 billion a year to interest payments. Toss in the war on terror (remember we have 36 years left), aging boomers and 50 million part time workers paying 25% more for health insurance, and I see no reason 30 years can't be trading at 5- 6%, which of course would do wonders for the housing market. Yep everything rate wise back to 2007 levels.
Goldman you guys are the best. 1.5 trillion dollar deficits should be great for the "market" and jobs. With the ¥ trading 150 and the € trading .80 it should kill off half the remaining manufacturers in this country. At that point manufacturing will be adding a whopping 5% to GDP.
At least oil will be $20 barrel which should really help our good buddies at the House of Saud, and contribute real stability in the ME.
Oops I forgot to throw in heath insurance cost rising 10-20% a year along with rising rates,which should put an end to all those, any of those full time, benefit rich, career jobs people had just a decade ago. Everyone will be part time. Well at least will have more time to spend with our family, extended family that is, as multi generational households will be the new norm.
Yep seems like the little squidies are on to something. Just watch out what you wish for Goldamites, eventually you'll all be replaced by algo ghost writers and 23 year olds communications grads with big giant titties.
It's enough to make you throw up your hands (or pull out your hair) but we suppose going forward (or at least beginning in 2017), we can just look at what Goldman thinks and assume that's where the Fed is heading.- end
Perhaps that is the goal; it fits with the Agenda21 and total control of people. They already see people as pawns; especially the military personnel. Why anyone would join that is beyond me; there is no honor in the murder of the innocent for the gain of Goldman Sachs Cabal. I know that is not PC and I know many enter with "noble" intentions, but willful ignorance is no excuse unless you are "young & dumb". As many of us were.
I wonder why they are "goldman sachs" rather than "fiatprintedmoneyman sachs" ....I suppose it just doesnt have the same ring to it. Funny how goldman sachs, has "goldman" in it, but they say gold is archaic and worthless.. Never mind, just random thoughts after four beers. Did you know the definition of "morgan" (as in jp morgan): a unit of inferred distance between genes on a chromosome that is used in constructing genetic maps and is equal to the distance for which the frequency of crossing over between specific pairs of genes is 100 percent ...ok, I have no clue what I am talking about...gonna have another beer and shut down my posts for the night :-) I bet I get tons of up arrows, not for my content, but for saying "i am gonna shut down my posts for the night" lol.
Oh, by the way, "Jesus rocks" :-)