Fed interest rate hikes will soon be yesterday’s news


The Federal Reserve raised US interest rates on Wednesday — just as expected.

And later this year, in the last months of Janet Yellen’s reign as chairwoman, there are likely to be more hikes — two more, maybe even three.

That will also be expected, but then what?

This is my bold forecast for the new year. If I’m right, I will remind you endlessly. If I’m wrong, please promise that you’ll forget all about this.

My prediction: By the end of 2017, Wall Street will be discussing when the Fed will cut rates. Increasing interest rates will be yesterday’s news.

I’m not saying these rate cuts will come in the first couple months of the new Fed chief’s term. Yellen will probably still be on the Fed board, and she’ll do her best to obstruct rate cuts because such a move will discredit her policies.

But the economy will still be struggling at the end of 2017, like it is now — with less than 1 percent annual growth so far in the first quarter.

The Fed indicated that the economy is stabilizing. With the economy now growing at only 0.9 percent annually — close to recession levels — you have to wonder whether Yellen serves cocktails to her crew at Fed meetings.

Something is making the fellow Fed governors irrationally exuberant. Stock prices rose sharply on Wednesday after the hike.

What Wall Street seems to be missing is that it has yet to realize that higher rates, especially in a weakening economy, is the worst of both worlds.



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