I am a simple man, but to me the relationship between the Fed and interest rates has less to do with Trump and more to do with the Fed’s continued involvement in monetary policy.
Personally I think the Fed due to the great recession took some unprecedented steps in regards to the lowering of rates and QE. Now they find themselves in a spot were folks and corps started taking on high levels of debt due to how inexpensive some of that debt had become. The feds know that they will have to raise interest rates, they need the slack in order to react to another big downturn.
The problem is how do you raise rates without creating a huge burden on people who have adjusted and begun living in cheap money environment? I am of the belief that the Feds were hoping for increases in income across the board, which would mitigate the impact of rising rates.
They did not see incomes rise to the level they had hoped and so they put the brakes on rate increases and instead are locked in this high stakes balancing act. See if they do not raise rates enough and for some reason or another we plunge into another economic crisis of sorts they will not have the slack to deal with said crisis.
My two cents.
I agree with this assessment.
December Housing Starts not looking good [1]. About -11.2% MoM and -10.9% YoY. Ouch. I think that YoY drop is the largest drop in 8 years.
Expect downward revisions in the GDP estimates.
ATL Fed just updated their Q4 estimate down to 1.8%.
Ouch. Not a good sign.
Are there any other reports due that may change the Q4 estimate?
Advanced Economic Indicators report [1] and the M3 Manufacturing (Full report) [2] are released tomorrow and could have some impact.
