ICAP: "The Window Of Opportunity For A Fed Rate Hike Has Closed"

Tyler Durden's picture

With September rate hike odds coiling bloe 10%, the market has already spoken about the possibility of a rate hike in 2 days. And since the Fed has never "surprised" the market by hiking when expectations of a rate increase were below 60% as we documented last year, it is unlikely that Yellen will seek to shock the market into an aggressive selloff.

And sure enough, in a note by Wrightson ICAP economist Lou Crandall, he writes that "the window of opportunity for a Fed rate hike has closed before the FOMC has a chance to meet, again.”

He adds that “no doubt” that Yellen will say at her press conference that Fed expects to tighten over time; yet hard for Fed to be “overly hawkish” since September statement will need to explain why policy makers aren’t hiking this week. FOMC may decide statement should remain neutral, leave it to Yellen to deliver “close but not quite there yet” message.

Crandall believes that while a "comfortable" majority on FOMC probably sees justification in at least a quarter point move at this point, ambiguity in near-term direction of economic data makes this a “ticklish” time to announce a hike.

Making matters worse for the Fed, the central bank would take a “reputational hit” if economic data remain ambiguous next month.

Looking at the dot plot, the ICAP economist believes that the "dots" will likely continue to show almost all FOMC members favoring at least one hike in 2016, along with slightly shallower tightening trajectory in 2017 and additional downward drift in estimates of long-run neutral rate. He concludes that the FOMC’s forecasting record has become a “sore point for many”; tightening in middle of what turned out to be a “soft” spell of data “would not be helpful to the institution”

Finally, looking at the near future, he says that a November hike “is not very plausible”; in absence of “extreme data outcome,” Fed should “keep its head down” in the week before a presidential election.

The question then is whether December is still live. The answer most likely depends on who the next US president is.

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Jethro's picture

HAHAHAHA. Like that was ever an option.

froze25's picture

Trump wins, there is a rate hike and banks cut off credit. Economy implodes. Blame is placed on him. Hillary wins (I doubt it now) they will likely still have a mess to clean up but blame will not be placed on her in the Media. It will likely be blamed on not doing enough of what got us in this situation to begin with. Another giant bailout will take place. Right now they do their best to keep the implosion from happening till after Nov. Trump 2016

Hitlery_4_Dictator's picture
"The Window Of Opportunity For A Fed Rate Hike Closed back in 2009"
ParkAveFlasher's picture

OT - another suspicious package in Union Square, Tylers

edit - false alarm, it's a toolbox. 

eatthebanksters's picture

My barometer says that things are slowing down in Silicon Valley.  If SV is slowing down then the rest of the county is really slowing down. Rate hikes?  What are those?  I don't see any on the near term horizon.

petar's picture

Two more rate hikes.. One in Z6 and one more in March H7

Sorry_about_Dresden's picture

There is a new Silicon Valley, it is called China! I read all the students we brought over here to get educate, are going back to China to open their own firms. Ever heard of Espressif and the ESP8266? They are eating our lunch!

I am a chemical engineer and haven't worked in two years, I need to buy a few pounds of good mid-grades, to earn a sustenance living. I need to buy some good bud, somebody hook me up?

Jethro's picture

That is what I've been speculating for months now. Obama and his asshole friends "pull the plug" on the way out the door. I'm all for it now, except that hopefully, a crash of the appropriate magnitude will also cause a loss of faith in the Fed and the monopoly money we have now. The tree of liberty needs watering

bluskyes's picture

There's always credit available ... for a price.

Dark Daze's picture
Dark Daze (not verified) bluskyes Sep 19, 2016 10:36 AM

Yeah, that's for sure. And the price today, in China, for off-shore yuan is 28% P.A. 

Sorry_about_Dresden's picture

What is this?? What do you mean by 28% P.A. ?

tom stamps's picture

Totally agree. If Trump wins, they enjoy blaming Trump. Clinton wins they try hard to contain but I don't care for Hillary's decisions. Rather have

Trump in there even though they'll be so hard on him!

Fisherman Blue's picture

It was just another jawbone to keep gold from exposing them.

SomethingSomethingDarkSide's picture

All waffling and no syrup

Goldbugger's picture

They cannot raise rates. Soon the currency devaluations will commence.They are prolonging the invevitable. But the RESET will still happen.



BorisTheBlade's picture

Everyone keeps focusing on fed interest rates, but they soon become irrelevant, with currency devaluing no matter how much nominal interest do you generate, effective interest rate will be negative. Only unknown is the exact moment reset starts, but I guess it won't happen until Obama leaves the office.

Dark Daze's picture
Dark Daze (not verified) Goldbugger Sep 19, 2016 10:34 AM

Devaluation is the only way he/she/it can default without naming it as an actual default. I guess there are going to be a mountain of future sell orders on the dollar, pretty soon, and then, of course they will get their inflation, just like they have been dreaming about. At least until China and Russia stabilize the situation. Who would have thought that two former communist countries would be the ones everbody looked to for salvation?


Hunter S. Thompson's picture

No more rate hikes while Obama is in office, that's for sure.

Jethro's picture

No kidding. That'd make the magic negro less shiny.

drstrangelove73's picture

You can buff a turd,and buff a turd,and buff a turd,but you can't make it shine...

Consuelo's picture



Actually, Mythbusters ~did~ manage to buff one out...


But the average Joe can still smear lipstick on a pig, so there's that...

ejmoosa's picture

Who raises rates when they know we are in a recession?

Greg's picture

Within a Depression.

youngman's picture

They cant..politics and with 20 trillion in debt....they just cant do it anymore...

Dark Daze's picture
Dark Daze (not verified) youngman Sep 19, 2016 10:31 AM

And Trump wants to spend somewhere between 7 and 10 trillion more, plus, the looming return to annual 1.2 Trillion deficits. So, by the time Trump is through, the debt will be somehwere in the neigborhood of 35 Trillion, or 200% of GDO.

Who the hell does Trump think will loan the US that kind of money? Better pull the plug now, before it is really to late.

stewie's picture

Who the hell does Trump think will loan the US that kind of money?

The Federal Reserve, my young Jedi.

tom stamps's picture

Better spending with someone who cares about the economy and knows how to get it going then someone like Obama who spends all that money and

care barely get 1% GDP!

lester1's picture

The US trade deficit is -$80 billion a month. That's bleeding dollars. Unless the Fed does a new QE, the data will continue to get worse.

pods's picture

The only way the USA survives is if we bleed dollars.
Can you imagine what would happen if all those printed dollars stayed here?

Venezimbabwe X10.


LawsofPhysics's picture

Please, global Weimar is inevitable.  I venture to guess it has already begun...

Hohum's picture

Cut that by 1/3 to 1/2.

BandGap's picture

What if they threw a party and no one showed up? I mean, all the central banks are being ignored.

Last stages of the currency war, time for some really big crap to be pulled into view.


101 years and counting's picture

"we will continue to jawbone hiking rates because we are as stupid as it would seem.  and, in fact, all we really care about is transferring money up the ladder.  and no better way than ZIRP and QE.  so, if you're in the bottom 90%, too fucking bad.  it will only get worse for you. hahahahaha"


silverer's picture

The creativity and bullshittery demand of the FED is enormous. Not only do investors have the buy the story as it stands now, they have to buy the future story. And for the FED, when they land there, they have to give a story that will stand further still more manipulation and contortion, which still must be believable, and also be able to be pushed off to yet another believable future delusion. Poor grandma Yellen must swallow Malox like Irishmen swallow beer at a drinking competition.

1835jackson's picture

After this meeting the headlines will read....


"How could so many be so wrong?".


They will raise rates. Janet Yellen wants to send a message to Wall St that they don't pull the strings. In Janet Yellen's head she is thinking... The Feds credibilty is hanging by a thread. But most importantly my own credibility is hanging by a thread. Something like that. Or maybe she wants to take a swing at Trump who was bad talking her.

youngman's picture

She is thinking that but she still wont do it

Dark Daze's picture
Dark Daze (not verified) 1835jackson Sep 19, 2016 10:28 AM

"Hanging by a string"? No, the string broke a long, long time ago.

Zero_Ledge's picture

I'm counting on it. I am short October and January Fed Fund Futures.  When those Octobers pay off 10 to 1, I'll be snorting coke off a dead hooker's chest.


HerrDoktor's picture

window reopens November 9 at 10:00

old naughty's picture

sheeples only hope...


Greg's picture

Two guys walk into a bar.  One asks the other: Did you hear the one about the Fed hiking interest rates?

CRM114's picture

Three blondes walk into a bar.


You'd think one of them would have noticed...

Quinvarius's picture

She cannot tighten without all the satellite currencies of the USD also tightening.  The banks are too much of a mess globally.  Money drops are more likely.  And they really need to stop buying assets.  It is not helpful at all when they buy actual legit assets, instead of fraudlent paper.

Downtoolong's picture


If Hillary starts pulling ahead in the polls they might hike before the election. The most transparent thing about the Fed now is how politicized it has become.