October 9, 2015
Fed's Lockhart still sees 2015 rate hike despite recent red flags
The economy remains on a satisfactory track and ... I see a (rate) liftoff decision later this year at the October or December FOMC meetings as likely appropriate. - Atlanta Fed President Dennis Lockhart
Trader Tom: Hey, did you hear that Lockhart still sees a rate hike later this year?
Tradet Jon: No, I heard that he still sees a rate hike decision later this year.
Trader Tom: Isn't that the same thing?
Trader Jon: Not exactly. There's a pretty big difference between a rate hike and a rate hike decision. That's why seasoned traders always parse the text.
Trader Tom: You know, this makes sense. Making rate hike decisions at interest rate decision meetings would certainly seem appropriate. I just assumed they were making rate hike decisions at every meeting.
Trader Jon: Been trading long?
Trader Tom: Started trading this year.
Trader Jon: Went long biotechs in late July?
Trader Tom: Yeah, how did you know?
Well, he only said it was "likely". I see that as 51% chance the Fed will make a decision on (interest) rates in October or December. There is a chance they won't even make a decision, or they could make an inappropriate decision.
ReplyDeleteI see that as likely, later this year.
Mr Slippery,
ReplyDeleteYes! You've nailed the spirit of today's lesson!
They could even decide that it would be inappropriate to make a decision.
In order to attempt to avoid that particular paradox and conundrum, they might even decide not to decide if it would be time to make a decision. Hahaha! :)
A cynic might suspect that the Fed won't raise rates before the 2016 elections. A cynic might.
ReplyDeleteThat depends on the known knowns and known unknowns of FED policy.
ReplyDeletedearieme,
ReplyDeleteA cynic might even suspect that it could be a tight race between the next rate hike and the next recession. Sigh.
Mitchell Bupp,
ReplyDeleteMonetary Rumsfeld policy for the win! ;)