...they hike 25bps by the end of the year. Just to show that they can and will...
There really is that possibility, and I deeply hope a better reason comes up. If we continue with our flat/negative inflation numbers then imho a hike would be a disaster ala 1930. Of coruse a lot can happen over the next 3 quarters and rising prices would make a hike or two necessary, but raising rates on a whim is crazy.
OK, so I'll admit it, "crazy" never stopped anyone...
Financially, Greece is still....Greece.
Greece’s leader warns Merkel of ‘impossible’ debt payments
http://www.ft.com/intl/cms/s/0/ae9d0cb8-d0b5-11e4-982a-00144feab7de.html#axzz3VD9FzbfX
I will continue to research the issue of if/why the Fed will raise rates. I completely agree that its crazy. However, as I’ve seen and heard of late, they’ve been laying the ground work for this rate increase for quite some time now and Yellin is getting impatient to make the move.
The best reason I’ve come across, and its a lousy one, for why the Fed feels compelled to raise rates is that rate control is one of the very few tools in their tool box and to the extent that rates remain near zero, they are essentially deprived of the use of this “tool”. Frankly, I think there’s something more to this, but I’ve not been able to parse it out. I will continue to try to discover it.
The greatest problem I see with this is that albeit the endless volume of speculation over hyper inflation, what the Fed has really been fighting is Deflation and we presently stand at the precipice of a Deflationary spiral. It would thus seem to me that to raise rates would be to push this economy off the cliff into that Deflationary spiral and with their history laid out before them, I have to believe the Fed knows that.