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Tags: marc faber | fed | rates | economy

Marc Faber: This Is 'Precisely the Wrong Time' for Fed to Hike

Marc Faber: This Is 'Precisely the Wrong Time' for Fed to Hike
Marc Faber (Getty)

By    |   Wednesday, 16 December 2015 08:26 AM EST

The Federal Reserve is set to raise rates at exactly "the wrong time," warns Marc Faber, the editor of the Gloom, Boom & Doom Report.

"If they raise rates, in theory, it's precisely the wrong time," he told CNBC. "The global economy has decelerated very badly, and many countries are already in recession, or going into recession,"

The Fed's decision will be released on Wednesday at 2 p.m. Eastern, with markets prepared for an initial 25 basis point "liftoff" that would move the Fed's target rate from the zero lower bound to a range of between 0.25 and 0.50 percentage points. It is to be followed by a news conference by Fed Chair Janet Yellen to elaborate on the central bank's latest policy statement.

The rate hike will separate the Fed from major central banks in Tokyo, Frankfurt, Beijing and elsewhere that are all battling to stimulate their economies and generate growth, the AP reported.

The initial hike expected on Wednesday will still leave U.S. policy extremely loose, and Fed officials have signaled they will act cautiously from that point forward to nurture a tepid recovery.

Markets and analysts will focus on the exact language the Fed uses in its statement to justify the hike and describe how it will evaluate the timing of a second and subsequent steps.

Some experts believe the nation's central bank painted itself into a corner.

"Given the strength of the signals that have been sent it would be credibility destroying not to carry through," former Treasury Secretary Larry Summers, a skeptic of the need to raise rates right now, said in remarks published Tuesday on his website.

Elsewhere, Faber said the outlook for American equities looks weak. "I don't think U.S. stocks are attractive by any measurement. They are expensive and earnings are going down, and if anything, eventually interest rates will be higher," he said.

When asked where he sees investment opportunity, Faber turned to Asia, mentioning Vietnam, Cambodia, India, Laos and Myanmar, CNBC reported.

Meanwhile, the most-accurate forecaster of the $13.1 trillion Treasurys market this year says the Fed is too optimistic in its plan for additional interest-rate increases after Wednesday’s expected liftoff, and that’s good news for bonds, Bloomberg reports.

Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC, an investment adviser in Philadelphia, expects 10-year yields to end 2016 at 2.22 percent, not far from their 2.27 percent level at 7:44 a.m. in New York Wednesday. He joins the slim ranks of contrarian voices -- the median forecast in a Bloomberg survey is 2.78 percent.

Investors have reason to heed LeBas’s advice. He’s proving the most prescient of 70 participants in a December 2014 Bloomberg survey.

His forecast for a 2.47 percent 10-year yield at the end of this month was the poll’s lowest, and it compared with the median estimate of 3.01 percent. He was also the only one projecting 30-year yields below 3 percent at year-end 2015, based on the view that inflation will remain below the Fed’s target. The long bond yielded about 3 percent Wednesday.

(Newsmax wire services contributed to this report).

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The Fed is set to raise rates at exactly the wrong time, warns Marc Faber, the editor of the Gloom, Boom & Doom Report.
marc faber, fed, rates, economy
Wednesday, 16 December 2015 08:26 AM
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