Will they or won’t they? Will the Federal Reserve raise interest rates this month, next month or next year.
Everyone, it seems, is waiting on the Fed.
Being as I know very little about these matters, I do not offer an opinion. I was intrigued, however, by this remark from the most recent Aden Forecast, a newsletter (sub. req.) published by Mary Anne and Pamela Aden. While everyone seems convinced that the Fed will act this year or early next year, the Aden sisters believe that the Fed might hold off raising interest rates for longer than anyone imagines.
One important reason why is because next year is an election year. As our dear friend Chuck Butler points out... The current Fed Board of Governors are all Obama appointees and presumably Democrats. What if the Fed hikes interest rates in early 2016 and the economy goes into a recession right in the middle of a presidential campaign? It would surely hand the election to the Republicans.
Since no one else, to my knowledge, is claiming that the Fed governors could be influenced by politics, the laws of contrary opinion suggest that they probably are.
For some perspective, yesterday the Wall Street Journal explained:
The chances of a Federal Reserve interest-rate increase in 2015 are diminishing amid new signs of anemic economic activity, a disappointing development for central bank officials who have been hoping to move this year after a prolonged period of easy-money policies.
Lackluster readings on consumer spending, inflation and jobs have virtually eliminated the chances of a move this month. Already, two Fed governors expressed doubts this week about whether the timing will be right this year, and the recent trove of data hasn’t reassured top officials about the economic outlook.
I report this for what it’s worth.