Fed Cert Alert

It was just about a year ago that I warned via the overview, “Reaction Time at the FOMC,” that US interest rates were set to rise. In the event the warning was a month too early before the Fed duly obliged by raising its Fed funds rate by 0.25%.

The FOMC meet up again next week so let’s see if an improvement on the timing of the next rise can be made. Dangerous that it is to go out on a limb, particularly when the herd are still minded that the Fed will wait until December before it moves, here goes for a bold prediction:

The Fed Funds Rate will be hiked Next Week and here’s why:

Kindly observation that central banks’, as evidenced by the FOMC in this case, have never made a pro-active decision in their lives, only re-active. The Fed Funds Rate (FFR) has followed the trend of the 2-year Bond yield, not the other way round and the No 2 is now higher by 400% since its 2011 low.

14-sept-2016-2

Note also that the 3-month MM rate is also 400% higher than its 2014 low and that the FFR slavishly follows these two metrics, both up and down. The fact that US CPI is trending lower once more, despite the enormous amount of stimulus, is irrelevant.

Bottom line: Forget the Fed rhetoric; forget CPI data and the herd.

Just look at the chart, as charts don’t lie, hence a Fed cert alert seems fitting.

 

 

 

 

 

 

 

 

 

 

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