Fed Might Begin Thinking about Maybe Raising Rates Possibly in the Future (Audio)

After her testimony to Congress this week, the mainstream media reported that Janet Yellen has put the Federal Reserve on the path to raising interest rates. However, Peter Schiff digs into Yellen’s official testimony from this week, showing beyond a shadow of a doubt that the Fed hasn’t even begun to think about a rate hike. It’s all right there in Yellen’s official prepared remarks. Peter also addresses the ridiculous popular notion that inflation is necessary for economic growth.

Highlights from Peter’s podcast:

“Janet Yellen prepares these remarks in advance, and I think they painstakingly pick each word, because they know how people parse through whatever they write. So if they wrote something, they meant to put it in there… I want to read a little bit of these prepared remarks… I think these remarks were among the most dovish I’ve read, and again, we’re supposed to be 3 months away from when they’re supposed to be raising rates…

“[Reading from Yellen’s prepared remarks: ’The committee judges that a high degree of policy accommodation remains appropriate.’] Why? If the economy is really recovering, we’ve reached escape velocity… Why would we still need a high degree of policy accommodation instead of a normal degree? … It’s a weak economy when you get stimulus, and a strong economy… when the Fed has restraint. The Fed is basically getting its cake and eating it too, saying the economy is doing well, yet it still needs a high degree of policy accommodation. Well, if it needs [that], it’s not doing well. It’s like your doctor telling you you’re doing well, but you have to stay in bed on life support…

“Also, she says we need to promote a return of inflation to 2% over the medium term. She uses the word ‘medium term’ a lot, because she doesn’t want to say short term. When inflation gets to 2%… they’re not going to say, ‘Aha! We’re there.’ They want it to stay at 2% for a while, because they’re afraid that it goes to 2% and comes back down…

“[Reading from Yellen’s prepared remarks: ‘The FOMC is also providing forward guidance that offers information about our policy outlook and the expectations for the future path of the Fed funds rate. In that regard, the committee judged in December and January that it can be patient in beginning to raise the Fed funds rate. This judgment reflects the fact that inflation continues to run well below the committee’s 2% objective, and that room for substantial improvement in labor conditions still remains.’] So we’re talking about 5.7% unemployment, and Yellen is saying there’s still room for substantial improvement. So what is she talking about? 5.7% is pretty low when it comes to unemployment… If they’re going to wait for substantial improvement on that front, we’re going to be waiting for a long time, because we’re no where close to that kind of improvement… Despite democrats touting how great the labor market is, Yellen is saying, ‘No, there’s still room for substantial improvement.’ … Substantial. That’s a big number.

“[Reading from Yellen’s prepared remarks: ‘If economic conditions continue to improve, as the Committee anticipates, the Committee will at some point begin considering an increase in the target range for the federal funds rate.’] Wait a minute. They haven’t even begun to consider raising interest rates yet? What are they doing at these FOMC meetings if they’re not considering raising rates… Think about that. They’re not even thinking about raising rates yet…

“[Reading from Yellen’s prepared remarks: ‘Before then, the Committee will change its forward guidance. However, it is important to emphasize that a modification of the forward guidance should not be read as indicating that the Committee will necessarily increase the target range in a couple of meetings.’] So in other words she said, ‘We’re not going to raise rates for at least a couple of meetings, but if we take the word patient out [of our forward guidance], don’t assume we’re going to raise rates in a couple of meetings, because we’re not.’ That’s what she’s saying…Why modify your guidance if it doesn’t mean anything. Basically, she’s saying ‘We might change our guidance, but it doesn’t actually mean anything. Don’t react to it…’

“All it means is that when they remove the word ‘patient’ they potentially might begin thinking about raising rates. Maybe they won’t begin thinking, and maybe they will. But thinking about raising rates and actually raising rates are two different things…

“This is how the Wall Street Journal reported. Quote, ‘Yellen puts Fed on path to lift rates.’ Where do they get off coming away with that? … No she didn’t. If anything, Yellen took the Fed off the path to lift rates by basically telling everybody that raising interest rates was the furthest thing from their mind. They’re not even thinking about it yet… How many times can Yellen put the Fed on the same path? … My point has been that they never really were on that path, it was just bluffing…

“Janet Yellen is talking out of both sides of her mouth here when she says rising prices are both good and bad at the same time… How does she explain that falling gas prices are good, but falling food prices are bad? Or any product? …

“Everybody still thinks the Fed is going to be raising rates… How could they possibly think that, (a) given what Yellen is saying, and (b) open your eyes and look at the economic data. The Fed says they’re data dependent. Well, the data is getting worse. Look at some of the data we got this week. We got Dallas Fed Manufacturing Survey collapse to minus 11.2. That’s the lowest level since April of 2013… It’s almost 2 years ago. This is the third month in a row that that Survey has missed its numbers… Also, on Monday we got the existing home sales plunged by a much greater than expected 4.9%. That was the biggest drop in January in existing homes in 5 years!”

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