Tags: Grant | Fed | interest | rates

Jim Grant: Fed Easing Has Distorted Financial Markets

By    |   Friday, 10 October 2014 12:20 PM

The Federal Reserve's decision to keep short-term interest rates at record lows for more than six years is distorting financial markets, artificially boosting stocks and junk bonds, says Jim Grant, editor of Grant's Interest Rate Observer.

"Interest rates now are not discovered as one discovers prices in a free market. They are administered and imposed," he told CNBC.

The Fed's federal funds rate target has stood at a record low of zero to 0.25 percent since December 2008.

The true value of asset prices would come in "clearer focus" if the Fed allowed rates to rise, Grant said. Since the 2008-09 financial crisis, "the Fed was wanting us all to get out of savings accounts and into junk bonds and equities," he said.

"It was very pleasant when the getting in was going on. Now perhaps, it's time for the getting out. It's much more problematic."

While most economists expect the Fed to start raising rates around the middle of next year, Peter Schiff, CEO of Euro Pacific Capital doesn't see it that way.

"I don't think they ever had a plan to hike rates," he told Yahoo.

"I think their plan is to launch QE4 [another round of quantitative easing], but they can't come out and admit that, so they've been pretending that they're going to raise rates."

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The Federal Reserve's decision to keep short-term interest rates at record lows for more than six years is distorting financial markets, artificially boosting stocks and junk bonds, says Jim Grant, editor of Grant's Interest Rate Observer.
Grant, Fed, interest, rates
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2014-20-10
Friday, 10 October 2014 12:20 PM
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