Posted on 08/24/2015 1:25:34 PM PDT by Citizen Zed
The public has been seemingly desperate for the Federal Reserve to raise interest rates.
"Savers are getting creamed here," has been a common refrain.
"Banks are getting crushed."
"Zero percent sends a bad message, it undermines confidence."
Even the experts seem upset by the inertia: "It's simply time," has become another popular phrase.
Imagine what would happen, then, if the Fed raised rates—and they dropped even lower, instead. That's effectively what's happening today.
Even if the Fed hasn't raised interest rates, it has stopped lowering them, and it has stopped the balance-sheet expansion that replaced rate cuts once its target rate hit zero.
That, combined with a stronger U.S. dollar, means despite rates still being near zero, the Fed has effectively been tightening monetary policy.
And yet, longer-term interest rates are dropping. The yield on the 10-year U.S. Treasury note was nearly 2.3 percent at the beginning of August; it just dropped back below 2 percent amid the global stock-market rout.
That is in sharp contrast to widely held expectations for rates to rise this year—a call that has been repeated, and repeatedly wrong, for many years now, even as the Fed has signaled it is about to hike rates for the first time in over a decade.
(Excerpt) Read more at cnbc.com ...
The “You Can’t Get There From Here,” syndrome.
CNBC is nonstop garbage. If the Fed could lower the cost of federal government borrowing any further than it has, it would have done so long ago. The whole reason the Fed funds rate is where it is, is because if it were any higher the federal budget would blow out in a big way. Calculate the interest spend on $18 trillion if the blended rate were 1 percent higher - and keep in mind that the federal government has gone way heavy into short-term bonds to minimize that spend already, so any rate hike would have a short-term effect.
I don’t think interest rates can be negative. /s
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