Rates should have been raised - Chad
From Yahoo Finance:
David Stockman is not a fan of the Fed. In fact he claims that the Fed is on a “jihad” against retirees and savers.
The former Reagan budget director and author of “The Great Deformation: The Corruption of Capitalism in America” visited Yahoo Finance ahead of the Fed announcement to discuss his predictions and the potential impact of today’s interest rate decision. “80 months of zero interest rates is downright crazy and it hasn’t helped the Main Street economy because we’re at peak debt,” he says.
Businesses in the U.S. are $12 trillion in debt. That’s $2 trillion more than before the crisis, but “all of it has gone into financial engineering—stock buybacks, mergers and acquisitions and so forth,” according to Stockman. “The jig is up; [the Fed] needs to get on with the business of allowing interest rates to find some normalized level.”
While Stockman believes that the Fed should absolutely raise rates today, he isn’t so sure that they will. But even if they do, he says they’ll muddle the effect by saying “‘one and done’ or ‘we’re going to sit back and watch this thing unfold for the next two or three months.’”
This all fuels an inflationary bubble on Wall Street, according to Stockman. “This massive money printing we’ve had has never gotten out of the canyons of Wall Street. It’s sitting there as excess reserves.”
According to Stockman, the weakness of the U.S. economy has been due to a lack of investment over the past 15 years and inflated labor costs in America that can’t compete on a global scale. “Simply printing more money and keeping interest rates at zero do not help that problem.”
Zero interest policies, says Stockman, are leading to the global economic turmoil we are currently experiencing. “In the last 15 years China took its debt from $2 trillion to $28 trillion… it’s a house of cards with an enormous overcapacity and enormous speculation and gambling that is beginning to roll over,” he says. “It’s just the leading edge of a global deflation that I think is underway as a consequence of all this excess credit growth that we’ve had.”
If the Fed raises rates and doesn’t mince words there’s going to be a long-running market correction, says Stockman. If the Fed doesn’t raise rates there will be a short-term relief rally but eventually the markets will lose confidence in the central bank bubble and we’ll be in store for a “huge correction.”
Fed holds rates steady in nod to global economic weakness US - FOMC
(Recasts with Fed policy statement)
Federal funds rate remains unchanged
Fed defers to global economic volatility
Yellen to hold news conference at 2:30 p.m. EDT (1830 GMT)
By Howard Schneider and Ann Saphir
WASHINGTON, Sept 17 (Reuters) - The U.S. Federal Reserve kept interest rates unchanged on Thursday in a nod to concerns about a weak world economy, but left open the possibility of a modest policy tightening later this year.
In what amounted to a tactical retreat, the U.S. central bank said an array of global risks and other factors had convinced it to delay what would have been the first rate hike in nearly a decade.
"Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term," the Fed said in its policy statement following the end of a two-day meeting. It added the risks to the U.S. economy remained nearly balanced but that it was "monitoring developments abroad."
However, the central bank maintained its bias towards a rate hike sometime this year, while lowering its long-term outlook for the economy. Fresh economic projections showed 13 of 17 Fed policymakers still foresee raising rates at least once in 2015, down from 15 at the last meeting in June. Four policymakers now believe rates should not be raised until at least 2016, compared to two who felt that way in June.
The Fed has policy meetings in October and December.
In deciding when to hike rates, the Fed repeated that it wanted to see "some further improvement in the labor market," and be "reasonably confident" that inflation will increase.
Taken as a whole, the latest Fed projections of slower GDP growth, low unemployment and still low inflation suggest that concerns of a so-called secular stagnation may be taking root among Fed policymakers. One policymaker even suggested a negative federal funds rate. The median projection of the 17 policymakers showed the Fed expects the economy to grow 2.1 percent this year, slightly faster than previously thought. However, its forecasts for GDP growth in 2016 and 2017 were downgraded. Policymakers also forecast inflation to creep only slowly toward the Fed's 2 percent target even as unemployment dips lower than previously expected. They now expect the unemployment rate to hit 4.8 percent next year, remaining at that level for as long as three years. The Fed's projected path of interest rates shifted downward, with the long-run federal funds rate now seen at 3.5 percent, compared to 3.75 percent at the last policy meeting. Fed Chair Janet Yellen was scheduled to hold a press conference later Thursday afternoon to elaborate on the decision.
The vote on the policy statement was a sign of how China's economic slowdown and market slide left Fed officials unnerved about the state of the world economy. Only Richmond Fed President Jeffrey Lacker dissented.
In recent months Fed officials like board member Jerome Powell and Atlanta Fed President Dennis Lockhart had publicly endorsed a September rate hike, forming a near majority along with longstanding inflation hawks like Lacker.
In the end, however, they were left with a muddled picture marked by low U.S. unemployment and steady economic growth, but no sign that inflation has begun to rise towards the Fed's target.
(Reporting by Howard Schneider; Editing by Paul Simao)