Click to enlarge.
I'd be tempted to predict a rate between 1.0% and 3.3% based on the "Cone of Decaying Monetary Policy" channel (and using the inverses of the natural logs to predict the rate in the future). However, that would assume we can even get back into that channel and stay there for any appreciable length of time. Can you say exponential trend channel failure?
I therefore predict that the Fed Funds Rate at some point in 2020 will be a mere 0.25%. Think ZIRP + Japan. It just feels right (and oh so wrong). Can it go higher between now and then? Maybe, maybe not. The higher it goes the more likely a monster will be unleashed though. I have few doubts about that.
Source Data:
St. Louis Fed: Custom Chart
The Fed publishes a "shadow fed fund rate" which converts the amount of QE (liquidity of money) into a equivalent "feds fund rate" (interest rate)
ReplyDeleteBottom of the page
http://www.frbatlanta.org/cqer/researchcq/shadow_rate.cfm
By their estimates we are running at an equivalent of -3% Fed Fund rate.
The Fed publishes a "shadow fed fund rate" which converts the amount of QE (liquidity of money) into a equivalent "feds fund rate" (interest rate)
ReplyDeleteBottom of the page
http://www.frbatlanta.org/cqer/researchcq/shadow_rate.cfm
By their estimates we are running at an equivalent of -3% Fed Fund rate.
jeff,
ReplyDelete-3% is certainly a long way from the channel, lol. Sigh.
Stair step charts like that always fascinate me. My next post has one too. Look for it soon!
ReplyDeletehmmm, in 1978 the BB was age 14-32 and the Fed had to throw the kitchen sink at them to stop them from borrowing too much too fast.
ReplyDeletein 2014 the BB echo is age 14-32 . . .
unfortunately for them we've already loaded a lot of debt on them . . .
http://research.stlouisfed.org/fred2/graph/?g=LHg
WTH happened in 2008 ? ? ?
Troy,
ReplyDeleteWe threw the kitchen sink at the baby boomers. Now we're letting the echo boomers borrow it, lol. Sigh.