With respect to the Fed, if they were truly data dependent on the current flow of news they would definitely not be raising rates. If they believe ‘mission accomplished’ and that their two mandates have essentially been met or are close to it, they can argue they are WAY behind the curve and let’s hike. If they are worried about asset price excess as Eric Rosengren is about commercial real estate, then hike but Mr. Rosengren, you don’t wait until cap rates get to 4% before you notice a problem because it’s already too late. Whatever the Fed chooses to do, 3 month LIBOR has already tightened for them as it is up 54 bps y/o/y vs the 25 bp rate hike last December. Rate hike odds ahead of tomorrow are at 24% and at 54% in December.
Managing Director, Chief Market Analyst
The Lindsey Group LLC