Low interest rates are the same as drug addiction!

mario urlic forex Draghi vs Yellen

And we can see that from yesterday FED’s decision to leave all rates unchanged. I was sure that the FED will hike yesterday, because all FED’s conditions (data-depended) have been fulfilled. Long-term unemployment forecats is 4.7-5.0%, right where the official unemployment rate is currently, while the Core PCE of 1.7% is already higher than the high range of the FED’s 2016 year end forecast of 1.4%. So, why wait? After the decision to stay on hold, I followed the Press Conference from Yellen and must say that she looks lost in space. Is that a proof that the printing money is some kind of addiction? It looks like that. First question in the press conference was devastating for Yellen and it comes from Steve Liesman, senior economics reporter for the cable financial television channel CNBC, who asked Yellen:

Swissquote IB 2018

 “Madam Chair, as you know, inflation has gone up the last two months. We had another strong jobs report. The tracking forecasts for GDP have returned to two percent. And yet the Fed stands pat while it’s in a process of what it said at launch in December was a process of normalization.

So I have two questions about this. Does the Fed have a credibility problem in the sense that it says it will do one thing under certain conditions, but doesn’t end up doing it? And then, frankly, if the current conditions are not sufficient for the Fed to raise rates, well, what would those conditions ever look like?”

The answer from Yellen was like this: “jabala, blablabla, yabalaba, blabla…”

I am not kidding, the answer on that question did not make any sense, in my opinion the Yellen just more embarrassed her self. I am stying at my stance that the FED should hike yesterday and that this was the right time for many reasons. But, they don’t share my oppinion because they all are addicted to the policy of cheap money. Draghi and the ECB are the next ‘drug’ addicts!

One comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s