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A Fine Mess

By Richard Russell

 

Do you remember Oliver Hardy saying to Stan Laurel, “A fine mess you’ve gotten us into!”  That pretty much applies to the Federal Reserve today. 

 

The problem: the Fed wants to normalize interest rates. This would mean allowing them to rise to around 3 or 3½ percent. Janet Yellen has practically guaranteed that there would be a rate rise in September. The Fed’s hope is that a rate rise would not disturb the markets. However, the markets know that a first rate hike almost always signals a series of rate rises.

 

If the Fed actually does institute the first rate increase in September, the question is: will that topple the stock market, and maybe the bond market? However, if the year 2015 ends and the Fed has not raised rates, the world will know that something about the economy is amiss.

 

The year 2016 is an election year, and a rate hike in ... Log in or subscribe to continue reading.


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