Tags: Bass | rate | Fed | Rieder

Hayman Capital's Bass: When the Fed Moves, 'It's Going to Cause a Problem'

By    |   Wednesday, 04 March 2015 08:20 AM

Hedge fund star Kyle Bass, founder of Hayman Capital Management, agrees with many other experts that the Federal Reserve will begin raising interest rates in June, but the process might not be pretty, he says.

The market isn't fully prepared for a rate hike, he said at a panel discussion, CNBC reports. Traders in the federal funds futures market see only a 19 percent chance of a rate increase in June.

"I think when she [Fed Chair Janet Yellen] moves, it's going to cause a problem," Bass said. The Fed has kept its federal funds rate target at a record low of zero to 0.25 percent for six years.

Rick Rieder, chief investment officer of fundamental fixed income at Blackrock, disagrees with Bass.

"I think markets are set up, are ready. They've been properly communicating about it," he said at the discussion, according to CNBC. Rieder was referring to indications from Fed officials that a rate hike is likely around mid-year.

Meanwhile, former Fed Chairman Ben Bernanke isn't exactly jumping for joy over proposals by congressional Republicans to audit the central bank.

"We hold ourselves accountable pretty well," he said in panel discussion at the Brookings Institution Monday, Barron's reports.

The Fed publicizes its policies, goals and economic projections throughout the year, with the chairman appearing before Congress twice a year. "I don't think Congress has failed to make the Fed accountable on those grounds," Bernanke noted.

Sen. Rand Paul's, R-Ky., "Audit the Fed" bill would have the Government Accountability Office assess Fed policy decisions. Another proposal would mandate that the Fed use mathematical rules — such as the Taylor Rule — to set policy.

Bernanke said the Fed already has enough rules. It is committed to a 2 percent inflation target, for example. "I don't think you can get much more precise than that," he said.

During financial and economic crises, the Fed needs freedom, Bernanke explained. In 2008, more rules "would have not been very helpful." The Fed provided massive stimulus then, with rate cuts and quantitative easing.

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Hedge fund star Kyle Bass, founder of Hayman Capital Management, agrees with many other experts that the Federal Reserve will begin raising interest rates in June, but the process might not be pretty, he says.
Bass, rate, Fed, Rieder
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2015-20-04
Wednesday, 04 March 2015 08:20 AM
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