Tags: Fed | Task | rates | raise

Yahoo Finance's Task: Fed Rate Hike Is Starting To Look Further Away

By    |   Wednesday, 21 January 2015 01:24 PM

The Federal Reserve has suggested widely that it hopes to raise rates this year, but investors would be wise to take the flurry of hints with a large grain of salt, according to Yahoo Finance Editor in Chief Aaron Task.

Task noted there are multiple reasons why the central bank might end up sitting on its hands rather than pulling the trigger in 2015, as previous forecasts of Fed tightening have been premature every year since 2009.

For starters, he explained, the core Consumer Price Index rose only 1.6 percent last year, and "like every other inflation statistic, is below the Fed's goal of 2 percent."

Also, Task listed the fact that wage growth, which Fed Chair Janet Yellen keeps touting as of primary importance, remains in the doldrums.

Outside of the U.S., European inflation is practically non-existent, the Chinese economy started slowing last year and crashing oil prices are putting economic pressure on producer countries like Brazil and Russia.

"Japan's ongoing economic struggles could be reason number six. Either way, if these trends keep up, don't be surprised if the narrative doesn't change from 'when will the Fed raise rates' to 'will the Fed do another round of QE [quantitative easing]?'" Task warned.

He said he is "hoping the Fed will be 'data dependent' in determining when and if to raise rates, rather than sticking to some artificial timetable it has set for itself."

"The risk of too much central bank 'transparency' is that when financial markets think they know what a central bank will do, they tend to take on MORE risk not less," Task wrote.

"My recommendation: Fed officials should go back into their ivory towers and stop talking to reporters."

Factors beyond the Fed's reach might be working to push a rate hike further away on the calendar of likelihood, 24/7 Wall St. reported.

"The conundrum for Janet Yellen and Federal Reserve members is that the European Central Bank is widely expected to undergo a further quantitative easing strategy soon with massive asset buying — and the U.S. dollar is already super strong against the euro and other currencies. It is widely expected that raising interest rates would only boost the U.S. dollar even further."

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The Federal Reserve has suggested widely that it hopes to raise rates this year, but investors would be wise to take the flurry of hints with a large grain of salt, according to Yahoo Finance Editor in Chief Aaron Task.
Fed, Task, rates, raise
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2015-24-21
Wednesday, 21 January 2015 01:24 PM
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