Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on December 16, 2015
Fed Ends Zero-Rate Era
The Federal Reserve raised interest rates for the first time in almost a decade in a widely telegraphed move while signaling that the pace of subsequent increases will be “gradual” and in line with previous projections.
The Federal Open Market Committee unanimously voted to set the new target range for the federal funds rate at 0.25 percent to 0.5 percent, up from zero to 0.25 percent. Policy makers separately forecast an appropriate rate of 1.375 percent at the end of 2016, the same as September, implying four quarter-point increases in the target range next year, based on the median number from 17 officials.
“The committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2 percent objective,” the FOMC said in a statement Wednesday following a two-day meeting in Washington. The Fed said it raised rates “given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes.”
The increase draws to a close an unprecedented period of record-low rates that were part of extraordinary and controversial Fed policies designed to stimulate the U.S. economy in the wake of the most devastating financial crisis since the Great Depression. The FOMC lowered its benchmark rate to near zero in December 2008, three months after the collapse of investment bank Lehman Brothers Holdings Inc. and 10 months before unemployment in the U.S. peaked at 10 percent.
While the vote was unanimous, the rate forecasts show that two officials among the full group of voters and non-voters saw no rate increases as appropriate in 2015, without identifying them.
“The committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate,” the FOMC said. “The actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”
Balance Sheet
The FOMC said it expects to maintain the size of its balance sheet “until normalization of the level of the federal funds rate is well under way.”
The quarter-point increase in the target fed funds rate, the overnight interbank lending rate that influences other borrowing costs in the economy, was forecast by 102 of 105 analysts surveyed by Bloomberg News.
The Fed gave a largely positive assessment of the U.S. economy, saying that expansion continued at a “moderate pace” and that a “range” of job-market indicators “confirms that underutilization of labor resources has diminished appreciably since early this year.”
The central bank also said that the risks to the outlook for economic activity and the labor market are now “balanced,” changing from a previous reference to being “nearly balanced.”
The Fed said monetary policy is still “accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.”
The central bank acknowledged the state of low inflation, saying that it plans to “carefully monitor actual and expected progress toward” its 2 percent.
As part of the decision, the Fed increased the interest it pays on overnight reverse repos to 0.25 percent from 0.05 percent to put a floor at the lower end of the range. It also raised the interest it pays on excess reserves held at the Fed to 0.5 percent from 0.25 percent to mark the upper end of the range.
In a related move, the Fed’s Board of Governors unanimously voted to raise the discount rate, which covers direct loans to banks, by a quarter point to 1 percent.
Press Conference
Fed Chair Janet Yellen is scheduled to hold a press conference at 2:30 p.m. in Washington.
In addition to setting rock-bottom short-term interest rates during the crisis, the Fed engaged in three rounds of bond purchases aimed at suppressing long-term rates to stimulate borrowing and spending. Officials also provided unusually explicit guidance, assuring investors for years they intended to keep rates low well into the future.
Prior to 2008, the effective fed funds rate had never dropped below 0.63 percent, according to data compiled by the St. Louis Fed dating back to 1954.
In Dec. 3 remarks Yellen drew attention to how much the economy had mended since the darkest days of the recession, noting that unemployment had fallen by half to 5 percent, close to Fed estimates for the long-run normal level.
Still, the recovery has been disappointing for many. Household incomes remain lower than they were a decade ago when adjusted for inflation, and wages have climbed only sluggishly even as firms hired back workers. Hourly earnings have risen by about an average 2.2 percent annual pace over the past seven years, compared with 3.3 percent in the 20 years through 2008.
GDP Forecast
Gross domestic product expansion hasn’t topped 3 percent since the third quarter of 2010, on a year-on-year basis. It’s projected to grow 2.2 percent in the three months through December.
Representing another symptom of weakness, inflation hasn’t reached the Fed’s 2 percent target since April 2012. The core version of the central bank’s preferred gauge of price pressures, which strips out volatile energy and food prices, was just 1.3 percent in the 12 months through October.
Yellen said Dec. 3 that continued labor-market improvement this year had bolstered her confidence that inflation would move back toward the Fed’s 2 percent goal.
20 Comments on "Fed Ends Zero-Rate Era"
Davy on Wed, 16th Dec 2015 1:19 pm
To be fair to the cornies I won’t be able to throw the Fed’s inability to raise rates in there face anymore although .25 is a pretty lame rate increase. They have a higher bar to maintain now and one with quicksand underneath so I suspect they will stumble soon. We will likely see green today with the markets and red on Friday. Going into next week the carnage may begin once all the consequences and unintended consequences sprout up.
twocats on Wed, 16th Dec 2015 1:31 pm
Comic Delight. In added giddiness, can’t even get to ZH right now its probably flooded with viewers.
COP21 won’t change anything, but the lip-service to reducing emissions will provide… smoke-screen (sorry, too easy)… for oil and gas companies to blame regulations for peak oil.
Meanwhile, if Obama wasn’t able to keep the regime going for whatever reason, better to have the Fed submarine the economy now so that Obama can begin to “save the day” before the elections start in earnest.
Reality can barely help them on any front, so to maintain the illusion…
it’s all optics at this point.
shortonoil on Wed, 16th Dec 2015 2:20 pm
“and it is reasonably confident that inflation will rise, over the medium term, to its 2 percent objective”
Oil fell $1.75 on the announcement. This is working out really well. Anyone else got a cure for a fatally wounded oil industry?
PracticalMaina on Wed, 16th Dec 2015 2:46 pm
Short, mercy kill. Shale should go bye bye so we can start getting used to scarcity.
ghung on Wed, 16th Dec 2015 3:13 pm
One would think that savers may gain a little, earning a bit on their deposits. Think again….
CNN: “America’s largest banks wasted little time Wednesday announcing that they will start charging more interest for loans, starting tomorrow. But they also made it clear that they would be pocketing the money themselves.
Savers won’t get higher interest on their deposits, yet, at least from some of t he largest American banks.”
http://money.cnn.com/2015/12/16/news/economy/fed-rate-hike-savers/index.html?iid=hp-stack-dom
Plantagenet on Wed, 16th Dec 2015 3:20 pm
Theres only one reason the Fed is raising rates now—the Fed has to raise rates because a recession is coming. If they don’t raise rates now they won’t be able to cut them when the recession starts.
Cheers!
twocats on Wed, 16th Dec 2015 4:51 pm
Only 20 or so more to go! cheers!
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/12/fed%20funds%20chart_0.jpg
GregT on Wed, 16th Dec 2015 5:00 pm
“Theres only one reason the Fed is raising rates now—the Fed has to raise rates because a recession is coming. If they don’t raise rates now they won’t be able to cut them when the recession starts.”
Keep working on it planter, you’re about half way there. Here’s a small clue; Why are interest rates almost at zero already?
makati1 on Wed, 16th Dec 2015 7:49 pm
I see a depression, not recession, GregT. If true numbers were known, the uS is already in a recession it never left.
I don’t see rates ever getting to 1%. Not that I care. Now it is going to get interesting.
ghung on Wed, 16th Dec 2015 8:13 pm
Mak said; “I see a depression, not recession…”
They’ll eventually call it something else, Mak; The Great Contraction or some such. Humanity has such a long way to fall, it’ll be off any scale history can describe. That said, your constant focus on the US and the West is idiotic at best, indicative of deep resentment. This will be the global equal-opportunity clusterfuck.
My guess is that China will suck the life out of the PI like a swarm of locusts.
GregT on Wed, 16th Dec 2015 8:17 pm
From what I gather Mak, raising interest rates at this point in time will likely bring the entire house of cards crashing down. Maybe that’s how they finally bring the world to its knees, and get the masses to beg for their one world system. Interesting times. Time to stock up on popcorn, the rest is mostly taken care of.
makati1 on Thu, 17th Dec 2015 1:46 am
ghung, the Ps is lucky. It has nothing that the Chinese want. What it does have, is already owned by Chinese Filipinos from generations ago.
The Beijing police force has more firepower and manpower than all of the PS military. Nothing to fear there. As long as the Filipinos keep the US from setting up another base/bulls eye in the Ps they will be safe.
The Chinese don’t even need it for a military base in the case of war with the US. The US would never get close enough to occupy the Ps. It is well withing the 1,000 mile range of the Chinese carrier killer missile (DF-21D) umbrella. If it escalates past those, then it will not matter where you live.
makati1 on Thu, 17th Dec 2015 1:52 am
GregT, I agree. I think the next year or so will tell the tale. There has to be a limited amount of rabbits the US can pull out of it’s hat to keep the whole charade going. It has already lasted years longer then I expected.
I too think it is all part of the plan. Destruction and chaos seems to be the only thing the US can do these days, but they are good at it.
Yep, lots of popcorn, a good beverage and a comfortable hammock or lounger. Sit back and watch the show. It promises to be a blockbuster. LOL
theedrich on Thu, 17th Dec 2015 2:52 am
As the wheels come off the free-money policy of the Fed, the administration and its sycophants are seeking some other means — any means — to maintain its sedation and control of the masses. In a totally different sphere, the overlords now want computer firms to devise “backdoor keys” which will allow law enforcement to spy on any and all cyber communications in the world. This is all proposed in the name of (imaginary) “security,” of course. But two powerful motivating factors behind this snooping impulse are: firstly, to increase governmentally enforced political correctness and the suppression of free speech everywhere over everyone (think European anti-White genosuicidism); and, secondly, to steal the thunder of any political enemies who may be calling for anything similar.
However, a 31-page report by computer security experts, Key under Doormats, pointed out three important roadblocks to this sci-fi nightmare: (1) “First, providing exceptional access to communications
would force a U-turn from the best practices now being deployed to make the Internet more secure.” (2) “Second, building in exceptional access would substantially increase system complexity. Security researchers inside and outside government agree that complexity is the enemy of security — every new feature can interact with others to create vulnerabilities.” (3) “Third, exceptional access would create concentrated targets that could attract bad
actors. Security credentials that unlock the data would have to be retained by the platform
provider, law enforcement agencies, or some other trusted third party.”
The experts also say that “The greatest impediment to exceptional access may be jurisdiction.” That is, not just the U.S., but the U.K., China, and virtually everywhere else would immediately demand such “backdoor” access. Forget about privacy or secure internet transactions, since credit-card and banking information would be accessible to everyone and every hacking program that had the “keys,” so that the entire internet economy would be impaired, if not shut down entirely. Even the shadow of free speech would disappear. “Backdoor” keys would amount to the ultimate in Big-Brotherism. (And never mind that politicians are simply unable to provide any concrete technical proposal for a cryptography control policy that would in any way work.)
But the control freaks of the world continue to insist that we must have such “security measures” to stop “terrorism.” And, most importantly, they are needed especially to pre-emptively silence (as so many websites already do) or even imprison “White racists.” So we can expect Ø and his stringpullers to lurch from their failure in the economic field to cyber snooping in order to maintain their control.
Davy on Thu, 17th Dec 2015 6:20 am
“ghung, the Ps is lucky. It has nothing that the Chinese want. What it does have, is already owned by Chinese Filipinos from generations ago.”
The Chinese may have no reason to invade the Philippines but they have every reason to take the resources of energy and food from the rest of the world at the expense of a place like the P’s with no realistic way to protect itself from being pushed to the back of the line for the last remaining resources.
The P’s has 100MIL people in an area the size of Arizona. It cannot provide all the needs for its people. Many of the urban dwellers rely on industry and globalism for their employment. Many are farmers and work the fisheries. It is well know that forests, soils, and water resources are in decline or localized failure in the P’s. Climate change has its crosshairs on the P’s. As the ocean warms storms will likely be much more numerous and severe. Wet Bulb temperature is going to rise making heat and humidity an issue.
There is no place that can hide for the triad of collapse. Climate change, fossil fuel depletion, and decaying global economy will all conspire to make all regions vulnerable. We can say this or that location has a more or less negative future. All locations are under threat with some more than others. I see a lot of negatives with the P’s due primarily to its dependence on globalism, its position in regards to climate change, and it high population levels requiring fossil fuels to maintain so many people. A place like Russia if it could avoid NUK war is much better place than the P’s.
Davy on Thu, 17th Dec 2015 6:42 am
The easy part was yesterday.
“Bloomberg’s Richard Breslow points out, ‘chose to hear the parts of the statement and press conference that they wanted to.”
“What The Market Chose To Ignore In Yesterday’s Fed Announceent”
http://www.zerohedge.com/news/2015-12-17/what-market-chose-ignore-yesterdays-fed-announceent
“What this explicitly means is two things: bad economic news is no longer good for the market – after all the dominant paradigm now is one of strong dollar=strong economy=strong S&P (ignoring that the stronger the dollar, the worse the earnings recession sets up to be, the sharper the full economic recession), and that as Breslow concludes, the “Fed needs to focus on the real economy and get out of the QE mindset. I suspect that will be easier said than done.”
“Finally, what yesterday’s hike also ignores is that as Jeffrey Gundlach explained recently, the economy is at a worse place than where it was the last time the Fed could have hiked, the industrial recession is now official, the earnings drop of the S&P500 is far more steep than it was 3 months ago, and China’s renewed devaluation is signaling that it is all uphill from here from the emerging markets.”
“Yes, the markets did not “freak out” yesterday (and they seem rather stable today), but once the post-rate hike “signaling” rush and euphoria wears off, the only answer is that the Fed did, as DB and BofA’s Michael Hartnett suggest (more on that shortly) a policy error and even the “markets”, having largely lost their discounting ability, will sooner or later reach that conclusion.”
“Beyond December, for the Fed to have pulled this off successfully, they will need to change the reaction function of the market to news – a response mechanism that has been codified and ossified for seven years. That will be the much harder task.”
“To make the “I’m feeling good about the economy” message something more than a throw-away line, they need to kill the bad-news-is-good sickness.”
Apneaman on Thu, 17th Dec 2015 7:25 am
theedrich, it’s all about you. Every move that TPTB make is solely to mess with you and the purity of the white race. They absolutely have no other agenda. Their entire lives are consumed with doing whatever they can to thwart the plans of you and your pure white brothers. I bet most of them lay awake at night conjuring up ways to spend all their time and resources on messing with your superior group. NO EXPENSE SHALL BE SPARED!!!! I bet you and your buddies feel special getting all that attention eh? How
selfflattering.shortonoil on Thu, 17th Dec 2015 8:47 am
The world is in a deflationary spiral, and there can be little question of that. Petroleum may not be the only factor involved, but it is the biggest kid in the play pen:
http://www.thehillsgroup.org/depletion2_022.htm
The FED is a private bank owned by its primary banks, and someone owns them (the 0.01%). As far as the economy is concerned, raising rates in this environment makes absolutely no sense. It seems very likely that it has to do with the objectives of the primary banks (the 0.01%). Since the financial system looks like a 1000 foot ball of twine that has been attacked by a herd of cats it is difficult to say what that objective actually is. To be sure, however, somewhere in that ball of knots, and kinks someone is pulling the strings. They are not being pulled for the benefit the benefit of the petroleum industry, or Joe Six. In the world of mega money altruism is a four letter word.
marmico on Fri, 18th Dec 2015 5:37 am
The world is in a deflationary spiral, and there can be little question of that
Bullshit. Talk to someone in Russia, India or Brazil, you fuctard.
http://www.hellenicshippingnews.com/wp-content/uploads/2015/11/efeasfs.jpg
ghung on Fri, 18th Dec 2015 8:43 am
The world is in an insanity spiral, and there can be little question of that
Absolutely. Talk to marmitard who’s continuously sociopathic comments beg for someone to put it out of its misery, or at least off this site.