Tags: Mirhaydari | Fed | raise | rates

Anthony Mirhaydari: Fed Won't Raise Rates Quickly, Just Like Bernanke Predicted

By    |   Thursday, 26 March 2015 08:20 AM

The Federal Reserve may be on its way toward raising interest rates, but don't expect the increases to come fast or hard, says Anthony Mirhaydari founder of Mirhaydari Capital Management.

He notes in The Fiscal Times that former Fed Chairman Ben Bernanke reportedly said last year that the federal funds rate won't return to its historical norm of 4 percent in his lifetime.

The Fed has kept its fed funds target at a record low of zero to 0.25 percent since December 2008.

The latest forecasts from Fed policymakers indicate they expect only two rate hikes this year, down from four in December, leaving the fed funds rate at 0.6 percent. "This could be too optimistic," Mirhaydari says.

"The only thing that could force the Fed's hand at this point would be a further tightening of the labor market leading to significant wage inflation," he maintains. Average hourly wages rose only 2 percent in the 12 months through February.

"As history has shown dating as far back as the monetary debasement that helped bring down the Roman Empire, easy money is hard to quit," he notes.

Meanwhile, Scott Minerd, chief investment officer at Guggenheim Partners, says the huge easing programs being carried out by central banks around the world will end in no good.

"New monetary orthodoxy is likely to permanently impair living standards for generations to come, while creating a false perception of reviving prosperity," he writes in the Financial Times. "The prospect of improvement in economic growth is largely a monetary illusion."

The European Central Bank and Bank of Japan are engaged in massive quantitative easing (QE), and the Federal Reserve's balance sheet stands at a whopping $4.5 trillion.

The near-zero interest rates created by central banks are penalizing many savers, Minerd notes. "The depressed returns available on fixed-income securities, largely as a result of QE, are acting as a tax on investors, including individual savers, pension funds and insurance companies," he says. Some money-market funds yield only 0.01 percent.

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The Federal Reserve may be on its way toward raising interest rates, but don't expect the increases to come fast or hard, says Anthony Mirhaydari founder of Mirhaydari Capital Management.
Mirhaydari, Fed, raise, rates
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2015-20-26
Thursday, 26 March 2015 08:20 AM
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