The full text if the [FOMC Statement](Federal Reserve issues FOMC statement) for December shows the committee unanimously approved a 1/4 percentage point increase in the Fed Funds rate to a range of 1.25% to 1.50%.
Interest rate paid on required and excess reserve balances to 1.50 percent, effective December 14, 2017.
The statement contained the usual meaningless blather about employment, price stability, and inflation that has been running below target.
The Dot Plot, a survey of interest rate expectations, shows an expectation the Fed will hike to a range of 2.00% to 2.25% in 2018.
I suggest fading the consensus. The yield curve is already close to flat, and with three more hikes it would likely invert. We are closer to the end of these rate hikes than the beginning.
Cartoon of the Day
(Janet’s last meeting) pic.twitter.com/4qyzApgE8L
— Hedgeye (@Hedgeye) December 13, 2017
The 3% and above predictions in the years ahead are a pipe dream. The Trump tax cuts, if they happen, will not spur growth.
The next major move in rates is lower.
Mike “Mish” Shedlock
El_Ted0….yes if the Fed can get the FF rates to 3 and take the balance sheet down to say $1 trillion without a recession the permabear gold bug central bank hater crowd may have to eat some serious crow (and I will be one of those eating crow!)
If we get 3% growth & 3 rate increases in 2018, it may be time to give the Monetarists some credit for getting us out of the 2008 financial crisis.
Most of the permabear crowd thought the Fed could never even raise rates .25 from zero without crashing the market. Now they are at 1.25%-1.5% and no crash yet. So far the permabears have been wrong (just like they have been wrong about everything else since 2009). But I can’t see the yield on the 10 yr treasury going up much from here. Mortgage rates closely track the 10 yr, and significantly higher mortgage rates would do damage to residential and commercial real estate. So ain’t gonna happen.
Well, your predictions about this years interest rate hikes were wrong all along. Maybe better next year.
Let me know when any of these rate hikes lead to higher interest rates for savers.
Interesting thoughts here from Mish. For years I’ve been hearing that the Free Market should be setting interest rates, not the Fed. Now it seems that the 10 year is the cap. So is the 10 year the Free Market? And now we’re finally closing in on a Free Market interest rate? If so, who next to blame for the economy?