Janet Yellen Says Fed Is Likely to Raise Interest Rates This Year

A week after the Fed declined to raise interest rates, the chairwoman reiterated that the central bank was not planning to wait much longer.

Comments: 72

  1. Chairwoman Yellen's remarks should remind us that economics remains at best an inexact science.

  2. This is PR spin by Yellen.

    The year will pass and then the Fed Reserve will say that X and Y happened so plans to raise rates were postponed. X and Y will be anything they point to -- it doesnt matter because the real plans are to keep the rates at effectively zero for large corps and large banks.

  3. Since the stock market went down after they declined to raise rates in September, they concluded that they'd better get going and raise rates.

    Of course, they're highly skilled economists who know exactly what to do.....

  4. Apparently, the Fed is seeing the US, and world economy, with rose colored glasses. Maybe, Ms Yellen should visit with one of the 99% to see what is really going on. If anything, she has to wait to see what Christmas season sales are like; which some predict will be terrible.

    The unemployment rate, inflation rate, etc. are not measuring the true economy. This purposely done by the federal government to make things look better than they actually are.

    The rest of the world is heading for a recession or already in one. For all we know, the US will soon follow. The only reason to raise interest rates is to give banks more profits to their existing record profits.

  5. "If you wait for the Robbins Spring will be over" Warren Buffet gave this bit of advice when blood was running in the streets of Wall Street during the banking crisis.

    What is really going on? I suspect most of the people of the world are waking up and going to work to improve their lives. Some of them are so brilliant they will drag the rest of us forward. Things will get better and things will get worse and still most of us will strive to improve and many of us will actually be successful over time. Pessimism is just another excuse to turn out the lights and roll over.

    You can see better through rose colored glasses than glasses that are so dark they don't let any light in.

  6. Actually, the average person is no one whose opinion one should seek. To achieve their average, simply invest in a big enough basket that catches it all. Whatever they do, the results are completely accidental. They have no special knowledge of where the economy is now, or where it is headed. To think they do, is just magical thinking. Someone with an IQ of 100 is going to know what is really going on? Sorry, but, fail.

  7. Yeah, whatever..... Tough to look important when you don't really know if what you're doing has an effect.

  8. How many times have we heard this song before?

    Chairperson Yellen is beginning to sound like Peter from the old story of “Peter and the Wolf” warning of what the Fed may do but may never happen OR maybe she is the singer from the wonderful musical “Fiddler on the Roof” weaving great tunes to hypnotize the media and markets.

    She should just pull the trigger and get it over with.

  9. Being too careful by a half, Ms. Yellin and her Federal Board, left a pall hanging over the recent decision to hold firm with no interest hike. The markets expected at least a 0.25% move and when that failed to materialize, left lingering was an uncertainty about our markets. It appeared to this outsider, that markets had already factored in a minimal rise in interest. Meeting those expectations likely would have resulted in no reaction. However, telegraphing a rise after the fact, does little to assuage anxiety. In fact, as we've seen, we are left not with confidence but with uncertainty.

    This could have been played with greater finesse.

  10. It is the Fed's job to "keep 'em guessing." The last thing we need is for the public to do exactly what the Fed tells them to do. Remember what happened when President Carter suggested that everyone might want to consider doing without their credit cards? Unintended consequences, indeed.

  11. I sometimes wonder why Fed worry inflation so much. Most of the macro fundamentals such as demographic change, flat wage trend, capital surplus, higher dollar, lower prices of commodities or declining trend of annual growth of productivity show the sign of disinflation or possible deflation in the future.
    Only reason I can think why Fed wants to raise interest is the pressure coming from banking industry that want improve their profit margin. Banking industry and their Wall Street friends have been the most vocal inflation alarmists since 2008 financial crisis.
    I think Fed lost their logical sanity to the political pressure.

  12. They are definitely worried about corporations borrowing money to buy back stock and pay dividends. This is pumping up the stock price of corporations, while doing little for the economy.

  13. No WS that is not how it works: large banks and large corporations want low rates. it means basically free money to invest anyway they want with no downside.

  14. Banks borrow short term at low rates and lend long term. Unless the economy improves enough to drive up long term rates, bank profits will fall when the Fed raises its discount rate. The pressure to raise rates is not coming from banks but from politicians who hope the rate rise will trigger a recession before the election. The problem with that strategy is that it will take a yield curve inversion to do the necessary damage. There is not enough time to drive the discount rate high enough and there is about a year lag before the effect is felt.

  15. Must be frustrating for all those bankers at the Fed, being held back from getting their beaks back into the trough.

  16. Right now, they get to borrow at near zero rates and lend at at least 3%. They're doing just fine like this.

  17. Same goes for home buyers, businesses, and pretty much anyone who needs to use credit in their life.

  18. This time we're going to do it, this time we're going to do it...

    said Lucy just before she pulled away the football and Charlie Brown crashed to the floor.

  19. Am I alone in wishing Bernanke was still the boss? A minor quarter point raise would have had no negative impact on economic vitality - but it would have sent a strong message to investors that the Fed is confident of economic growth - just when it was needed. Yes - the Fed is in the "message" business too.

    Yellen is far too discrete; overall, the investment community is not confident by half in its opinion of her compared to that held of Bernanke. And while - as Krugman noted - those nasty bankers would benefit from an environment of rising interest rates so would the millions of savers - many retired - who are terrified of the stock market or investing in boom priced real estate. They have gotten nothing on their depleting savings the past eight years.

    And no group has benefited more from zero interest rates than those much despised .01%'ers; easy money - actually, very very, easy money - and the subterfuge market of speculative investing has exploded; the latest obvious example being Turing drugs and its raising the price of a generic from $13.50/pill to $750/pill. This is what zero rates held forever gets the nation.

  20. Right now the plutocrats are using cheap borrowing to dry up public investments.

  21. Yellen's correct title at Federal Reserve is "chair," not "chairwoman."

  22. They missed the boat three years ago now they are screwed they can't raise interest rates.

  23. "Yet the Fed has found itself forced to experiment. The immense stimulus campaign that it started in response to the 2008 financial crisis changed its relationship with the financial markets. It has pumped so many dollars into the system that it cannot easily drain enough money to discourage lending, its traditional approach. Instead, the Fed plans to throw more money at the problem, paying lenders not to make loans."
    -from the most important NY Times article this year: The Fed's Policy Mechanics Retool for a Rise in Interest Rates.
    So the bankers get paid to lower rates and to raise them, with our money.
    The increase in the money supply belongs to all citizens, but an "accident" of history funnels it all into the pockets of the richest people on the planet.

  24. Is there a reason they keep mentioning this every few months? Raise the rates already. You don't need to tell us for 14 months.

  25. Yellen and the Fed will back off again when the market tanks in reaction to this news. The Fed is between a rock and a hard place; you can't reduce rates to zero and keep printing money. This was a classic blunder by the Fed. Our record federal debt and the amount of that debt owned by China will keep our economic growth at its current anemic levels for years to come.

  26. Why can't the money supply continue to be inflated in order to accommodate budget deficits? What difference does it make who the money is owed to? If it were not China, it would be someone else. In fact, China has an incentive not to rock the economic boat since it has such a large investment in the U.S. economy.

  27. U.S. inflation has been tame for 30 years, compared to most of the 20th century. Are we getting complacent? I guess we'll find out after the fact, but meanwhile I (like many) wonder if my retirement savings need some protection. Some ideas on how to protect against inflation are here, and, surprisingly, they don't include TIPS: http://bit.ly/1iPLclx

  28. Yellen never learns. The Fed has been expecting higher inflation for about 6 years now and it has never happened; nor have interest rates spiked; nor has the dollar collapsed as all the Republican economic scolds and the bond market vigilantes have predicted.

    Yellen is essentially putting her foot in her mouth once again. What if the
    Asian "Black Swan" rears its ugly head again (as it likely will) and markets and emerging market currencies and economies crater (sending tsunamis around the world)? Why set yourself up for such a possibility, which would mean once again a rate hike would be delayed and more of the Fed's credibility (whatever is left) would erode further.

    Yellen should keep her mouth shut and see what happens by year end.

  29. Why should the Fed chairman keep her mouth shut? It is her duty to give guidance to the public at large. And the idea that you should raise rates because bad thlngs may happen and therefore rate hikes would be delayed further? If bad things do happen, why should anyone consider raising rates?

  30. Janet Yellen should be decisive with the urgency of now instead of spooking the markets and keeping the nervous stock market investors in a limbo. As one could say it better to JY, finish clearing your bowels or quit the pot.

  31. Why should anyone care about "nervous stock market investors" except their families?

  32. There is a lot of muddled thinking regarding interest rates, both at the Federal Reserve and in this comment section. The only justification for raising rates is inflation at or above targeted levels. Any other posited justification cannot withstand even casual scrutiny.

    Even if one believes that an inflation target of two percent is sensible, measures of inflation in the U.S. have consistently run below that level. Every economist and politician who has predicted that inflation would hit targeted levels, let alone those who predicted runaway inflation, have been proven wrong over a period of years. Whether these people reached their conclusions through the use of models, analyzing economic data and trends, or through gut instinct, they have demonstrated their inability to predict inflation. When someone is repeatedly wrong, they can no longer be looked to as an authority on such a consequential decision.

    The U.S. is still emerging from an historically sever economic event, and there are significant downside risks from raising rates too soon. At this juncture, given the failures of those people who predicted inflation to materialize, the Fed should await clear signs that inflation is meeting targeted levels over a period of quarters before raising rates.

  33. No worries about inflation when much of consumer spending eats capital.

  34. The justifications for not raising rates are an Honest, Stable unemployment rate, a stable inflation rate, and a reasonable, normal, accommodative interest rate, that serves business and the public, alike. To me that's around 2%.

  35. JEG: You apparently believe the government's inflation statistics. Out in the real world, prices that average people pay are going up much faster than their take home pay, so why don't you touch base with them and find out if inflation is a problem? While you're at it, how about talking with retirees who are living off their retirement savings, can't get a decent risk-free return, and consequently have reduced their discretionary spending or are drawing down principal and are scared stiff they will outlive their money? ZIRP was intended as an emergency measure to buffer the macroeconomic shock from the collapsing real estate and stock market bubbles and to help profligate banks regrow their capital. Six years later, it's hard to argue that those emergency conditions haven't been resolved. Time to get on with normalizing interest rate policy, if for no other reason than the Fed needs some ammunition for the next crisis.

  36. Sounds like what we heard last year; and maybe the year before. The self-serving Fed works for the 1% and has a strong conflict of interest. It will keep rates low as long as it can get away with it. And by making low rates essentially a structural component of our current economy, the Fed has ensured that whatever it does now will be unpleasant in the short-term.

  37. This is nonsense. The 1% prefer higher interest rates. They have wealth, and they'd like to see an appropriate return on their assets. The current policy of distorting the reward for thrift and risk-taking panders to the Left.

  38. Any increase in interest rates by the Fed would have the greatest impact on consumers whose debt is directly tied to Fed interest rates. Producers aren't going to produce more or less because of the modest changes, but a home equity line of credit will take money out of the economy if the interest rate increases. The psychology behind Fed rate changes is counter-intuitive. Reducing rates on credit card debt would be a significant benefit to the economy, but raising Fed interest rates would have the opposite result.

  39. I wonder if the next phase of the Fed's war on savers will be negative interest rates. Yellen made just a passing allusion to them. If that's the case they'll probably push for the elimination of cash, too. It wouldn't do to have savers evading a negative interest rate haircut by taking their money out of the banks.

  40. It is a shame we no longer have Milton Friedman to discipline the rambling economic baloney in her speech.

  41. The "dual mandate" Congress placed on the Federal Reserve Bank asks it to do two unrelated things simultaneously: bring the economy to full employment and maintain stable money value. Monetary policy can maintain stable money value, but using it to boost employment is just pushing on a rope. Congress itself has to do that with fiscal policy, not monetary policy.

  42. The long period of low rates has affected economic psychology in a way the Fed does not seem to recognize: Raising rates ( a little) will have a positive effect and improve the economy, and even stock prices which are over-reacting now to the prospect of higher rates. Comments such as that of JEG reflect conventional thinking that does not apply in this special circumstance.

  43. The economies of the rest of the world are heavily tied to the dollar. And those economies are not doing so well. Add to that the unsettling impact of mass migration. Raising interest rates will just increase the stress.

    Our monthly bills keep on rising - but it's not inflation. Businesses are just squeezing harder on our ever-shrinking pockets. Higher interest rates for most of us would be another hard squeeze. If it weren't for the cheap foreign labor providing food and goods and services, our society would start a free fall into some sort of mass revolution and transformation. Thus, we are squeezed and stuck and need those foreigners who keep our society afloat but who rely on our dollar.

    The decision on where our lives are headed cannot be made by the Fed. The Fed can only remove some bumps and ease transitions. Our economic dilemma is an American and worldwide political and social problem. Decisions that affect our economy are being made by individuals, corporations, and foreign governments. Where is our governance?

  44. "Ms. Yellen concluded her remarks with obvious difficulty and only after a long pause", and had to be examined by EMTs because she “felt dehydrated”.

    I want to read her body language as a kind of monetary Freudian slip of what she is actually thinking re: the state of the economy, or as something symbolic of that economy’s recent history: a kind of “TARP” time-out, requiring a little hydro-QE before her corporeal assets became too illiquid.

    Perhaps a little chicken soup for her would have been good. Higher interest rates for an economy still under the weather from Alan Greenspan’s, “Let the markets regulate themselves” is less clear as a remedy.

    In any case, her FED and its interest rate spooks have become the “The Boy Who Cried Wolf”. Her FED just creates uncertainty and mistrust.

    And as far as Freudian slips in economics go, a cigar is probably just a cigar.

  45. Who writes these headlines?

    No, Yellen didn't say the Fed is likely to raise interest rates this year.

    She said that if inflation rises to meet the 2% benchmark, the Fed will raise interest rates.

    That's a completely unremarkable statement, reflecting basic macroeconomic public policy.

    “To be reasonably confident that inflation will return to 2 percent over the next few years, we need, in turn, to be reasonably confident that we will see continued solid economic growth and further gains in resource utilization, with longer-term inflation expectations remaining near their prerecession level,” she said. “Fortunately, prospects for the U.S. economy generally appear solid.”

    Guess what? Barring substantial federal deficit spending, there isn't any chance of sufficient gains in resource utilization to trigger inflation. Saying that prospects 'appear solid' is Fed-speak for "We hope there is sufficient spending to utilize American economic resources (labor, capital) because that will allow for moderate inflation. Once we see it, we'll raise rates to prevent above-target inflation. But we won't see it until we see it, so settle down folks."

  46. What is this? A game of hide and seek? Just do it, for pity's sake.

  47. Anyone with a pencil and half a brain can see raising rates even .25 basis points would sink what little we have left of the economy.

    The economic statistics we receive from government agencies is meaningless.

    The only thing that matters is the amount of debt we have today and into the future. I believe we are headed toward negative rates.

    Yellen needs to drink more water and serve less Koolaid.

  48. Doctor Yellen and other Fed. Chairmen keep reminding us that their decisions are data driven. Unless you have a better reading and understanding of the data, your predictions and characterizations of the Fed's decisions are merely ad hominem fortune-teller level of discussion.

  49. It would seem that a policy "corner" (as in "painted into a corner") has arisen, insofar as Dr. Yellen and others have identified expectations as a, and perhaps the, key component in managing inflation. That is, to stoke inflation the Fed must raise rates. Yet the Fed is loath to raise rates until inflation shows signs of arising from somnolence. Chicken? Or egg?
    Perhaps Dr. Bernake will not be the only modern Fed President to find innovation necessary. It may be necessary to find a method to raise rates publicly while in the background quietly expanding the money supply at a rate greater than the contracting effects of the public rate rise. If in fact the rate rise contributes to inflationary expectations, so much the better.

  50. The Fed, and the other major central banks all were wrong footed by the degree of commodities hoarding in China over the past decade or so. They can't be blamed for not knowing how much stuff was/is being held in warehouses.
    China will shortly attempt to export steel and other could at below cost in order to use up these commodities and keep their workers in various industries employed. We should be ready and waiting with high tariffs.

  51. There's a dead hand on the whole public discussion of interest rates.

  52. It is past time to raise interest rates.

    Interest rates near zero are having a devastating financial effect on many who are at or near retirement, who need to live off of interest from a lifetime of hard-earned savings. These folks are being forced to spend down their principal, and may well run out of money during their lifetimes.

    Something similar is happening on a much larger scale, to pension funds that cannot grow their accumulations as expected. These funds, both government and private, face possible bankrupcy, and someone is going to have to pay the bills, either the already overburdened taxpayer, or retirees who may suddenly find that the pension checks they depend on stop coming.

    Other issues with artificially zero rates include the stock market bubble that now appears to be bursting, and the simple fact that if there is another financial crisis, the Fed will not have the ability to lower interest rates as a tool to help resolve the crisis, if rates are already zero.

    Money is not free, and artificially keeping rates at zero for as long as they have been is bad for the economy, on both a global scale, and for individuals who are diligently trying to save their money.

    It is well past time for rates to be allowed to rise, slowly, to reasonable market-driven levels.

  53. Market driven? These are market driven rates. It was the market which drove the 2008 financial debacle. These current rates are a direct result of that.

  54. A 1/4 point rise is not going to make much difference one way or another. It is the waffling of Janet Yellen that makes for the uncertainty in the economy. Future interest rates can't climb to a point that makes the US dollar too strong, or we price our goods out of the market, and a slowdown in our economy. We can't have a policy that is based on Seniors getting good interest rates so that they can retire in style. Unfortunately, there are no guarantees in investing.

  55. In both the USA and Canada, if the unemployment rate were adjusted for all those who dropped out of the labour market since 2008 because they lost hope, and the substitution of low-paying insecure jobs for the once well-paying "secure" jobs, the statistical picture of economic welfare on this continent would change dramatically and indicate that not much has improved all that dramatically since 2008. There is little to no evidence of supply-side constraints in the labour market pushing wages up, nor has demand on the whole (other than for iPhones) bumped up against supply generating demand-pull inflation. There are also huge stores of liquidity sitting on the sidelines waiting for good investment opportunities, so no shortage of capital now or on the horizon. In short, it's hard to see the analytical basis for justifying preemptive increases of interest rates - unless they are relying on forecasting models, which have a habit of being notoriously unreliable for a host of well-known reasons.

  56. This could prove to be Yellen's and the Fed's big, historical, mistake. Not increasing the rates last September 17th, was the correct move. Many people in this newspaper and elsewhere have convincingly argued that the economy is in the mend from very unusual circumstances, and that textbook monetary policy does not apply. Fortunately this is not just theoretical: we have real world examples --most notably Japan, but also the current Eurozone, and others-- where prematurely increasing the rate caused near-permanent damage to the economy. Unfortunately not many people are listening and many want interest rate liftoff (why?).

    The US economy is now the sole engine of the world economy. Europe, Japan, China, not to say emerging markets, are all facing dismal economic performance. The US is recovering from the Great Recession, the labor market is improving, but there is no inflation to be seen! Even financial conditions have tightened from recent volatility in financial markets. So why increase rates?? Let the economy overheat a little, ensure that we have full utilization, let wages face upward pressure and then start normalizing rates. Why before? The damage to the US economy from a rate mistake could be measure in a decade lost. Why risk it?

    The Fed needs to convincingly and unambiguously see inflation before even thinking on when to raise rates.

  57. Seven years lost already. Three more and we'll have lost your decade. Yes, sure, let's have the Fed do the same thing that our Congress has been doing... nothing at all! I'm sure that will work.

  58. Apparently Janet Yellen last evening was channeling Saint Augustine, who famously said: "Give me chastity and continence, but not yet."

  59. What is really going on?
    As 'teh market' -(aka 'the gamblers' - aka 'the Casino') is very, very nervous right
    and any mistep can bring a 'correction' in the Casino Janet Yellen has moved from being a Banker to being a Psychotherapist. In the Germanic sense of putting down teh market on her couch and speaking to IT - just the way Sigmund (Freud) used to speak to his patients - with the full knowledge - that IF she speaks to forceful -(or the truth) the patient might come completely unhinged - sooo with the full knowledge, that if she might raise the rate it might be the signal for so many to leave the burning Casino that it completely burns down - or if she doesn't raise the bubblers and gamblers might overdo it to such an extent that finally the Casino will collapse under the weight of a 100 Million NYC Penthouse.

    So - let's be really nice to Dame Yellen she is between the preverberal rock and a hard place.

  60. Wall Street banks committed a number of well-documented crimes that caused the American people to lose 20% of their wealth during the 2008 crash. In the aftermath, instead of breaking up these criminal institutions and jailing those responsible for massive fraud, these banks were not only kept alive, but were rewarded in the form of the transfer of trillions of dollars from the Fed.

    This "out-of-thin-air" money is being used by investment banks to inflate the next bubble, which will most likely be called a "tech bubble." In a "playful" essay -- "Countdown to 2016 Tech Bubble Bursting: The Salesforce Building Indicator" -- I posted on my website, I came up with a date for the next crash. I even put up a countdown clock!

    "I see the years-long regime of "quantitative easing" by the Fed as the main culprit behind this upcoming bubble bursting. Basically the Fed has transferred trillions of dollars to the same Wall Street banks that crashed the economy in 2008. This "out of thin air" money has basically become "gambling money." The funds have found their way to Silicon Valley "venture capitalists" who have in turn use it to capitalize a huge number of tech companies that are purportedly offering "disruptive technology" solutions." - See more at: http://www.luismendoza.com/index.php/about-me/commentary/countdown#sthas...

  61. Gotta keep the banksters happy.

  62. Dr. Yellen: It's time for you to leave your ivory tower. Out in the real world, prices that average people pay are going up much faster than their take home pay, so why not touch base and find out if they think inflation is a problem? While you're at it, how about talking with retirees who are living off their retirement savings, can't get a decent risk-free return because of your monetary policy, and consequently have reduced their discretionary spending and/or are drawing down principal and are scared stiff they will outlive their money? ZIRP and QE were intended by your predecessor as emergency measures to buffer the fallout from the collapsing real estate and stock market bubbles, and to help profligate banks regrow their depleted capital. Six years later, it's hard to argue that those emergency conditions haven't been resolved. Time to get on with normalizing interest rate policy, if for no other reason than the Fed needs some ammunition for the next crisis.

  63. Inflation data skepticism is a form of paranoia.

  64. There is a problem with asking people about their own inflation numbers. Self-interest. They are the ones who are spending more in the areas that are raising prices. For example: rents are rising because they are competing for vacancies, not because those people are refusing to pay higher asking prices, and walking away. Those very same people will be the first to vote for even lower gasoline prices, as well, no matter how much driving they are doing.

  65. The countries banks and companies that have debt in dollars had better be doing whatever they can to change that.

  66. Enough of this!!! Either raise the interest rates a quarter of a point if necessary or do not do it. Everyone is tired of the woman who yells "wolf" repeatedly.

  67. Inflation is a monetary, not an economic, phenomenon that is only randomly correlated with economic growth. There can be strong economic growth and low or declining inflation (the nineties and the current era). There can be weak economic growth, or even contraction, and high inflation (the seventies in the US; Venezuela, et al, right now).

    So why does the Fed seem to ascribe to the hoary, disproved ideas embodied in the Phillips curve? Because it has no other lever than tinkering with the supply of money to use in its futile attempts to manage economic growth. Poor management of the money supply can cause temporary economic dislocations (the Great Depression and Great Recession), but money supply tinkering alone does not a poor or vibrant economic system make.

    Why does the Fed keep claiming it plans to raise rates but doesn't? Because raising rates right now would be mismanagement of the money supply that might indeed yield some economic dislocations, though it fears filling the punch bowl with a promise to not raise them for the foreseeable future might yield economic dislocations of an even greater magnitude.

    Yet the financial markets, whose participants have been led to believe they wag the economic dog's tail, parse every utterance of every Fed official as if they were shamans reading goat entrails.

    This is all so silly.

  68. I am greatly disappointed in Janet Yellen. She isn't making a lot of sense. Her line is basically that we should risk a damaging premature increase in interest rates to head off non-existent inflation and non-existent bubbles.

    Let's face it. She is in over her head and basically unqualified with little to no experience in leadership or making decisions. Yes, she was a Fed bank president, but that basically entails making speeches.

    This is not a good situation, and the market trades accordingly.

  69. Once upon a time there was a Federal Reserve that was constantly warning that it was going to raise interest rates.

    “The economy is getting stronger, we´re going to raise the rates!”

    “The labor market is getting stronger, we´re going to raise the rates!”

    “Inflation will come back, we´re going to raise the rates!”

    The board and chairman of the Fed would sing this like the chorus in a Greek tragedy, and every time they did investors would shudder with fear and markets would sink.

    However after each warning the Fed didn´t raise the rates and investors grew weary of these constant warnings and paid less and less attention to them.

    Then one day the Fed really did increase rates, to 0.25%.

    Investors looked at that and said to themselves, “0.25%, that is an interest rate? That is less than peanuts. With that the rate I get on my money market account might go from 0.01% to maybe 0.05%. There was a time when my return was 100 times that. Well, at least now I might be able to buy sum gum with the interest on my money market account.”

    So the investors realized that they had nothing to fear from the Fed and its interest rates as the Fed had become a toothless tiger.

  70. And how much "havoc" has this idle threat cause the last few years? the Fed sounds like "Chicken Little" as of late

  71. The global economy is in deep transition: China, a major commodity buyer is slowing down considerably. Its not just that gas prices are falling like they did last year, the fall seems more permanent and less than $2.00 a gallon for gas could stay with us for a longer period. That means over time, anything petroleum based in manufacturing, transportation, and heating will also profoundly impact our deflation numbers.

    5.1% unemployment sounds good, but 5.1% today as opposed to 5.1% in the 90's are two totally different scenarios. Folks, I work in retail management at a grocery store. If you want to put your ear to the pavement to gather consumer sentiment, do what I do and you will get a lot of feedback; and people today are just hanging on.

    I am optimistic. This all smells like the 90's to me when Japan was in the tanker and the US was booming, only this time its China with its lack of demand impacting commodity prices. Think of it, every day your typical consumer, regardless of economic class gets reminded of lower prices driving by gas stations. As that impact seeps down in other industries, we experience lower living expenses, and a more confident consumer with more disposable income. If commodity prices stay low, 2017 or even 2018 may be time for the Fed to act...but here is the caveat, commodity prices need to stay low for at least a year, and believe me, I will hear more positive comments in the place I work, which is as close to consumer sentiment as you can get.