Fed Hikes Rates, Unleashing First Tightening Cycle In Over 11 Years

Tyler Durden's picture

On the 7th anniversary of entering ZIRP, and for the first time since June 29th 2006, The Federal Reserve announced today that it will try and raise interest rates:

*FED RAISES INTEREST RATES 0.25 POINT IN UNANIMOUS VOTE

Of course, the flowery language and dots are as dovish as possible while maintaining some semblance of credibility with regard growth expectations as The Fed unleashes a tightening cycle for the first time in over 11 years.

Pre-FOMC: S&P Futs 2050, 2Y 98bps, 10Y 2.29%, Gold $1072, Oil $36, EURUSD 1.0960

 

 

Heading into the decision, gold and silver suddenly started to fade, bond yields slid notably, and the USD jerked lower.

What's happened since The Fed folded in September? Macro "data" got worse... Market "data" got better...

 

The Fed has never raised rates in December when stocks were down over the last 6 months...

h/t @RyanDetrick

And when it has raised rates in December, stocks have pushed lower.

 

The Fed is raising rates today with the VIX above 20 for the first time since 2000...

 

That did not end well...

 

The Fed is also raising rates with Junk bonds trading worse that after Lehman...

 

* * *

In the end, the Fed did not surprise, and raised interest rates for the first time in almost a decade in a widely telegraphed move while signaling that the pace of subsequent increases will be “gradual” and in line with previous projections. The Federal Open Market Committee unanimously voted to set the new target range for the federal funds rate at 0.25 percent to 0.5 percent, up from zero to 0.25 percent. Policy makers separately forecast an appropriate rate of 1.375 percent at the end of 2016, the same as September, implying four quarter-point increases in the target range next year, based on the median number from 17 officials.

“The committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2 percent objective,” the FOMC said in a statement Wednesday following a two-day meeting in Washington. The Fed said it raised rates “given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes.”

The increase draws to a close an unprecedented period of record-low rates that were part of extraordinary and controversial Fed policies designed to stimulate the U.S. economy in the wake of the most devastating financial crisis since the Great Depression. The FOMC lowered its benchmark rate to near zero in December 2008, three months after the collapse of investment bank Lehman Brothers Holdings Inc. and 10 months before unemployment in the U.S. peaked at 10 percent.
 

*  *  *

Full Redline below:

The number of words per statement:

 

There was much expectation that the Fed's announcement would be a Dovish hike based on a reduction in the 2016 median dot, however the Fed did not do that, and instead while the Kocherlakota negative dot was removed, the FOMC kept the median 2016 fed funds rate at 1.4% for year end, suggesting 4 rate hikes during 2016 and that the market is underestimating the pace of rate increases.

Where there was some dovishness was in the 2017 year end median FF, which was reduced from 2.6% to 2.4%. This can be seen in the compared dot plots.

Additionally, what is perhaps even more surprising is that while the Fed did boost its 2016 year end GDP forecast, it cut the median core PCE forecast from 1.7% to 1.6%, suggesting that the deflationary forces continue to prevail aside from the "transitory" impact of oil.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Deathrips's picture

Fuck The FED!!

 

RIPS

Shocker's picture

We are still so far from a recovery

Layoff List: http://www.dailyjobcuts.com

-

Tyler Durderian's picture

Looks like I might have to open up a soup kitchen.

My first and ONLY customer:

Janet Yellen on foodstamps

Odin's picture

"...I felt a great disturbance in the Force, as if millions of algos suddenly cried out in terror and were suddenly silenced. I fear something terrible has happened to interests rates...."

-Master Bernanke

Gaius Frakkin' Baltar's picture

Unanimous too... haha...

I wonder if they're trying to feign strength? Nah...

Rally on until reality sets in. That won't be long.

thesonandheir's picture

Fair play to Old Yeller for starting to flush the turds that Bernanke left in the toilet.

 

 

And get a new server Tyler.

nope-1004's picture

She's wearing purple!  Any of you psychology brains here want to elaborate?  I've been told about personality colors and the colors people choose to wear, etc...  Purple is NOT good.

 

NidStyles's picture

That new Jew Wars movie is certainly a Farce.....

 

 

This rate hike, we shall see....

Bilderberg Member's picture

Dusting off my Pets.com certificates...Lets light this candle!

OrangeJews's picture

Let's get Webvan back out there on it's own!

Stackers's picture

Me thinks the Fed might be smarter than they look and they purposely delayed raising interest rates until they knew 80% of traders would be on Christmas vacation

Tall Tom's picture

Purple is the color of ROYALTY. It is the color associated with wealth, wisdom, and power.

 

Many "Financial Experts" will wear purple ties in public appearance.

 

Nero banned the wearing of purple during his reign over Rome under the penalty of death.

 

The subliminal message is that she has the ultimate power.

 

That is one power hungry and prideful CUNT...who has only served to fuck you and empower her friends.

Depression is Coming's picture

Yellen is the 7th highest paid person at the fed...she's not even queen of her own castle. All this old fool does is bake cookies and bring them to meetings (she is a damn good baker). As a lifelong academic, Yellen jumped at the chance to sit in the seat of power..no one even knew this trolls name 2 years ago.

Tall Tom's picture

I knew her name well more than two years ago as she was the Governor of the Federal Reserve Bank at San Francisco.

 

Just because you do not follow the career paths of the people at the FED does not mean that everybody else does not.

 

You do not advance to becoming the Governor of a Federal Reserve Bank by baking cookies.

 

She is one vicious bitch, politically connected, has the ultimate seat of power, and it DOES NOT SERVE YOU, nor anyone else for that matter, to underestimate her, as she, and the rest of that nest of vipers, is out to FUCK YOU OVER.

 

Her compensation in an intrinsically worthless currency is not indicative of the role which she plays.

 

She is not there for compensation. She acts to CONSOLIDATE HER POWER and is quite SELF INTERESTED.

 

It is not about the money. It never has been.

 

Only the enslaved are interested in the currency of enslavement.

Depression is Coming's picture

took my comment a bit to literal.. Was just illustrating that Yellen does not make 1 decision at the fed. She didn't even make them in San fran. I worked for NY Fed for half a year when I came out of grad school (don't even put them on my resume) before running for the hills (you would not believe the incompetence of 80% of the workforce..the rest are fairly bright (book smart only)).

You would think San fran fed would be a key member bank...they are one of, if not the lowest volume bank (for the number of financial institutions they "regulate"). No one on the east coast + central US (Dallas/Chicago) pays any attention to what they do.

This woman deserves no where near the credit you give her. Remember who appoints the fed head...

old naughty's picture

remember who told "who appoints the fed head" to?

"purple" is given to "followers" temporarily...

Blankenstein's picture

She was the Chair of Bill Clinton's Council of Economic Advisors from 1997 to 1999.

 

https://en.wikipedia.org/wiki/Janet_Yellen

Mr.Sono's picture

There goes the punch bowl. Get ready for the junkies to come out and cry.

giggler321's picture

You sound Fed UP?

I bet they've got their foot to the floor still on those printing presses while the lips lie

freewolf7's picture

This should accelerate things.

mayhem_korner's picture

 

 

Re-posting this point from yesterday:

The last time oil was $36/bbl, in December 2004 (when Tom Brady was only 2 Super Bowl rings into his utter domination of the NFL), gold was $440/oz.  So while the shills at CNBC are focused on the credit-levitated stawk bubble, the reality is that gold has roughly 2 1/2 times its purchasing power than 11 years ago.  And that's ignoring the monkey-hammering affects of the GLD-to-Comex physical ratio.

Bring the Gold's picture

Fuck Tom Brady, Belichek and the multi-time caught cheating Cheatriots. If they were blatantly caught twice how many other times did they get away with cheating. Patriots are the perfect team to represent America and it's Oligarchs. Dominant by in broad daylight cheating. I'm not even an nfl fan and I still loathe the Cheatriots.

I'm with you on Gold though. ;)

mayhem_korner's picture

 

 

I wonder if you loathe the Vikings and the Chargers - the two teams confirmed of tampering with footballs in the 2014 season - as much as you loathe the Patriots. 

Or could it be that your loathing wells up from the fact that the Patriots have won more than every other team since the dot-com bubble burst?

What would Occam's Razor say?  Bueller?  Anybody?

dipsit's picture

0 SuperBowls won by the Patriots without SpyGate or DeflateGate

pods's picture

But they did almost have a perfect season!

#Almost

Depression is Coming's picture

Your realize every team in the NFL was doing the same "spying" as the patriots...if your angry because they do a better job at it than most other teams...I'd say your anger is a bit misplaced.

(All this coming from a Jets fan)

at least Tom Brady's wife makes more than he does!

Rikky's picture

bullshit.  but i guess since you said it it must be true.

Bring the Gold's picture

Were there penalties imposed on those teams or did a Massachusetts judge step in like they did for Brady? Yeah, it is the fact they keep getting away with it and "winning" that I find offensive. Much like the lakers from 2000-2002. Totally aided and abetted by the commissioner. Anyways I have loved closed to 100% of your posts mayhem, but I can't stand that team and that's even acknowledging Brady as a generational talent which he is. The fact that Brady is talented enough to win frequently without cheating makes the cheating worse not better.

mayhem_korner's picture

 

 

Appreciate the nod.  I'll keep you on my "nice" list (Flakmeister is not on that list).

But still...check out http://yourteamcheats.com/, which puts the Patriots as "below average" cheaters in the NFL.  Tops are Denver, the Jets, and the Steelers.  All of whom are regularly denied SB appearances by Bill & Tom.

JRobby's picture

You are now on a list of people who keep lists.

 

Herd Redirection Committee's picture

Cheaters?  I heard the Patriots are... RACIST!

Dave Thomas's picture

Where is Freddie when you need him? Freddie!?

JRobby's picture

I loathe people that spend too much time talking about and thinking about football. A ethanization program to thin that out would be good.

We have many more important issues facing our children and grandchildren right now.

Rules of Fight Club

Bring the Gold's picture

I don't even really follow the NFL. Many of my friends do so I've learned by osmosis the little I know. I just don't like cheating in any for.

JRobby's picture

Send your friends in first against the brutal war trolls. Other than that advice, I have no answers.

jeff montanye's picture

indeed. euthanization.

war trolls first.

hxc's picture

Chargers fan here; fuck you.

pazmaker's picture

Bring the Gold, you want some cheese with that wine?

 

I thought Most Zher's study the facts and look at the facts before hurling accusations, apparently when it comes to sports  .ogical facts and truths go out the window.

Bring the Gold's picture

See my reply above. I treat sports very differently than history, geo-politics and economics. It can be a fun distraction, but not something I spend hours researching. I know enough to not like cheating and favoritism. Mayhem has opened my eyes to the fact that apparently cheating is rampant. I don't really think it's worth wasting anymore time on the NFL. I shouldn't have commented on Mayhem's post. I just really like his posts so the Brady love annoyed me.

Captain Debtcrash's picture

CNBC can’t stop saying how dovish the fed statement is, but a rate hike is tightening plain and simple.  The markets are buying the “a rate hike is dovish” BS for now, but we’ll see how long that lasts when reality hits.

 

Don’t let the markets see this chart.

MANvsMACHINE's picture

Rate hike IS dovish.

Now pull my finger!

RonArgent's picture

Janet Yellen: Poster-Boy for Abstinence