InternationalMarkets & Economy

Hiking rates far more dangerous than staying put

Inside and near the Fed, the discussion is about 'asymmetric' risk
  • After a high-volatility stretch early this year, markets are dead.
  • The conditions which led to early-year volatility are still in place, with one exception: the Fed is off the table, no longer raising rates.

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We’re back to cowboy movies: “It’s quiet out there -- too quiet.” After a high-volatility stretch early this year, markets are dead. Little movement in price, and trading volumes falling. But the conditions which led to early-year volatility are still in place, with one exception: the Fed is off the table. The Fed’s first 0.25 percent hike in December may not have mattered much by itself, but the Fed’s insistence on a death march of hikes ahead was devastating worldwide. It took a while for Yellen and her majority to get it, and to say so, but they do. And now they have evidence of domestic slowing: first-quarter GDP (gross domestic product) grew hardly at all. March retail sales fell 0.3 percent -- so good only because auto sales are still positive. Nearly one-third of U.S. auto “sales” are now by lease, and the potential is big for an off-lease and used vehicle glut, and new inventories themselves are bloated. March industrial production was expected...