The Fed: We Came, We Saw, We Did Nothing – The Mainstream Is Catching On to the Game

Once again, the Federal Reserve came, saw, and did nothing.

This has become modus operandi for the Fed over the last two years. As each FOMC meeting approaches, speculation about a possible rate hike ramps up and then the Janet Yellen does…nothing. The one exception was last December, and that turned out to be a complete disaster.

The pundits and analysts are already talking about the possibility of a September hike. Odds are, we’ll witness a repeat performance – or should I say non-performance.

Interestingly, the mainstream is starting to catch on to the game.

In many ways, Peter Schiff has served as the voice calling out in the wilderness. He’s repeatedly said the Fed will not raise rates, and in fact, a cut and more quantitative easing are more likely in our future. This week, he appeared on CNBC’s Futures Now and reiterated that message:

I still believe – and I said this in December of last year – that the next move by the Fed is going to be a cut in rates…It’s the opposite of Teddy Roosevelt. He used to say ‘speak softly but carry a big stick,’ but when it comes to rate hikes the Fed has no stick. So, all they can do is speak loudly and hope nobody notices the absence of a stick. They want to keep talking about all the rate hikes and how they’re going to raise interest rates. But the last thing they want to do is actually do that because then the whole economy will implode and then the markets will realize the box that we’re in.”

Increasingly, Peter is not alone in believing the Fed is not going to pull the trigger on rate hikes any time soon. Head of commodity strategy at TD Securities Bart Melek told Kitco News his company remains bullish on gold because its analysts don’t believe the Fed will raise rates until mid-2017 at the earliest:

Yes, a September rate hike is a possibility, but I don’t think that is going to happen. I don’t think the Fed even knows what it wants to do.”

RBC Wealth Management managing director George Gero also expressed skepticism about the prospect of a Fed rate hike, despite its attempt to keep a September boost on the table:

They had to keep a rate hike on the table because they need something on the table. But I am not listening to the Fed. The bond market is telling the story and with falling yields they are saying that there is no rate hike this year.”

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Other analysts say even if the Fed does make a move, say in December, it will be another “one-and-done.” INTL FCStone independent commodity consultant Edward Meir said market reaction after the FOMC meeting indicates people aren’t buying the rate hike rhetoric, noting 10-year Treasuries rallied and the US dollar gave up initial gains:

We can only suspect that the tone of the Fed statement may have led the market to believe that once the next rate move was out of the way – and not until December, with September coming a close second – the Fed may be done for a while as it assesses how the economy is responding its moves.”

Blanchard and Company presided and CEO David Beahm noted that a rate hike right before the presidential election is highly unlikely:

With the presidential race already too close to call, a rate hike before the election could derail the stock market, slow job creation and dash the illusion of prosperity that Democrats would like to credit to President Obama and their party…The Fed is most likely to stand pat on interest-rate hikes until at least its December meeting, and most likely beyond.”

All-in-all, it seems like a pretty good bet you’re going to hear a whole lot of talk about rate hikes over the next month – but when it’s all said and done, not a whole lot of action.

Photo by Kurtis Garbutt via Flickr

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