- Today the Federal Reserve raised interest rates for the third time in 10 years
- Of course, the tightening cycle began with the first rate hike in December of 2015
- Followed by the second rate hike in December of last year
- And now, breaking from tradition, rather than waiting an entire year for the third hike
- We got the hike in March
- Of course the Fed had allowed market expectations to rise to 100% in anticipation of this rate hike
- When the Fed raised rates for the first time they talked about raising rates for an awfully long time before they actually got around to doing it
- Ironically, though, about 2 hours earlier than the rate hike announcement, the Atlanta Fed revised down again its projection for Q1 GDP to .9
- Remember – at the beginning of February, not even 6 weeks ago, the Atlant Fed was at 3.4% for Q1 GDP
- They’re down to .9%! That is a huge collapse in estimates for economic growth in the first quarter
- And I’m sure it portends ill for subsequent quarters
- And remember – Janet Yellen has always said that the Federal Reserve is not on a preset course
- And that rate hikes that they are forecasting will only happen to the extent that their economic forecast pans out
- That all of their rosy expectations of economic recovery has come true
- Yet none of it has come true
- If anything, you’ve had a collapse in growth estimates since the last time the Fed met, yet
- The collapse in GDP forecast has done nothing to alter the Fed’s path, because they’ve ignored all the data
- And they raised interest rates yet again
- That doesn’t mean that interest rates are high, I mean they’re still very low
- Remember, we’re still not at a range between .75% and 1% so the average of that range, the midpoint, is still below 1%
- 1% was the emergency level that Alan Greenspan slashed rates to, after the dot com bubble bust and after the September 11 terrorist attack sent the U.S. economy into recession
- At that point, in a recession, the lowest rates got was 1%
- The Fed would have to hike rates again to get back up there
Podcast: Download
