3/16/2015 0 Comments
Whoever thinks the first 50 bps of Fed Funds rate increase is going to slow the economy is mistaken. Banks may begin to lend more if the deposit rate increases a bit. All this talk and waiting is crazy. The economic numbers are in no way consistent with such weakness as ZIRP implies. Yes the USD will strengthen, but the economy is not so dependent on exports to warrant significant weakness. In fact, stocks which import some of their cogs might see an improvement in margins. This will help strengthen the weaker economies around the globe and reinstate some confidence in the world's economy. The Fed Funds rate needs to get into the 200 - 300 bps range before it begins to put the brakes on the economy.
Michael Grove, CFA