Fed Rate Hike: Will She or Won’t She? (Audio)
Peter Schiff reviews the latest economic data ignored by the mainstream media and maintains his forecast that the Federal Reserve will not raise interest rates this week. Peter also explains why mainstream analysts are all wrong, whether they argue for or against a rate hike.
What does the Fed have to hang their hat on? All the economic data is pointing towards a decelerating economy, towards recession. All they can do it point to the jobs numbers and say, ‘Well, but we have a low unemployment rate.’ So what? First of all, employment has already been a lagging, rather than a leading, indicator. Companies don’t lay people off, and then we have a recession. That’s not how it works…”
Highlights from the podcast:
“I still think the odds are that they [the Federal Reserve] won’t do it – that they’re going to leave interest rates at zero. But everybody is discussing whether or not the Fed will raise rates, or if they should raise rates…
“Here’s what nobody talks about. The official target for the Fed Funds Rate right now is between zero and 0.25 basis points. So the Fed is targeting a range. The low end of that range is zero. The upper end of that range is 0.25. So what is the Fed talking about doing? Or what does everybody thing think the Fed is going to do? They’re not talking about raising the range from 0.25 to 0.5. Nobody is talking about that. They’re talking about narrowing the range, so it’s 0.25. So instead of targeting a range, they’re targeting the high end of that existing range. The way I look at it, I don’t even think that’s a rate hike…
“If we’re so worried about moving interest rates to one-quarter of 1%, a level that had we never been this low, people would have thought was ridiculous. When Alan Greenspan lowered interest rates to 1% after the dot-com bubble burst and after September 11th, people thought, ‘This is ridiculous. How can we have rates this low?’ Now, we’re talking about raising them to a quarter of that and people are saying we can’t risk that…
“That is one of the other reasons that I think the Fed is going to err on leaving rates at zero. Because they look worse if they raise rates and then they have to cut them. They look incompetent. They look foolish. If they just leave them at zero, and then have to launch QE4, they can look prescient… Ironically, if the Fed doesn’t raise rates, they’re going to continue to maintain the bluff that they’re about to. They’re going to actually talk tougher if they don’t raise rates than if they do…
“The dollar topped out against the euro and the Swiss franc, I think in March, against the British pound in April. So it has only been gaining new heights relative to emerging market currencies, some commodity currencies. I think this is the end of this dollar bull. The Fed might even hasten the end with a slight rate hike, because the markets will start to anticipate the cuts. Because any rate hike sows the seeds of the next rate cut, because the rate hike pushes us into recession quicker…
“Let’s talk about all the economic news everybody ignored today. The first release we got was the August retail sales. Everybody was expecting a rise of 0.3. We weren’t too far off the mark. We rose 0.2, which is still less than expected… These are not great numbers. Even if we had hit the estimate, they wouldn’t have been great… Yet all the news stories I read today were about how consumer spending is up. Yes, it’s up, but less than they thought, and again, this is not adjusted for prices. So are consumers spending more, or do the things that they buy cost more? Because none of this is adjusted for inflation.
“The worst number we got of the day came out at the same time as retail sales. That was the Empire State Manufacturing Survey… Last month we got a horrible number – minus 14.92. That was the lowest number, I think, since March or April of 2009, while we were still in the Great Recession… Wall Street was looking for the number to bounce back this month and just be down 0.5. Still a negative number, but nowhere as near the disaster of the prior month. Well, guess what. They were wrong. It was almost as big a disaster, because September was minus 14.67, barely an improvement from minus 14.92 from August… This has got to be the worst back-to-back number for the Empire State Manufacturing Survey certainly since the Great Recession of ’08, ’09, maybe including…
“You don’t get this kind of data if the economy is in great shape. The Fed has been waiting seven years to raise rates for data like this? Why didn’t they raise rates years ago when the data was better? Because if they’re raised them years ago, they simply would have pricked the bubble that much sooner…
“What does the Fed have to hang their hat on? All the economic data is pointing towards a decelerating economy, towards recession. All they can do it point to the jobs numbers and say, ‘Well, but we have a low unemployment rate.’ So what? First of all, employment has already been a lagging, rather than a leading, indicator. Companies don’t lay people off, and then we have a recession. That’s not how it works…”
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