Rates won’t get a hike this week — but they won’t go down, either

Despite income growth, the Federal Reserve won't raise rates this month
  • The Fed will not hike rates this week.
  • Global risk is more outsized today than any time since 1930.

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The rise in long-term rates last week has been stopped by additional lousy economic news from August: retail sales and industrial production shrank versus forecast gains. However, the big game is still the central banks. The Fed will not hike rates this week, but for U.S. bond and mortgage yields to decline, we need new action by the ECB (European Central Bank) and BOJ (Bank of Japan), and both appear paralyzed. Thus explore new horizons in Fed-bashing. First my own. What can the Fed really do? I am of course a Fed-fan, or at least a believer in the need for active intervention, especially its new post-bubble duty as credit regulator. But the power to intervene demands extraordinary judgment, itself dependent on skepticism of theory, no matter how well-established or cherished. One of my Fed heroes has been Eric Rosengren, Boston Fed, who in the summer of 2008 was the first to see that the collapse of credit markets had more than offset a year of intensive Fed easing. ...