So what does everyone think about this decision?
Did you think that the rates were going to get raised or did you think they were going to stay where they were.
I didn't think they were going to get raised and businesses are enjoying this and that is the main focus to the country right now I feel like.
Way too much focus on the Fed. QE has dampened bank lending. The sooner it's over with, the better.
Didn't think so, given current inflation, foreign economies (China), volatility, etc.
Even if they did, it wouldn't affect the economy too much, in my opinion...they were talking, what? 25 basis points? That wouldn't do much if anything in the short term.
This article has awesome insight on rate hikes in its first few pages https://www.allianzglobalinvestors.de/MDBWS/doc/14-03-151%20Fokus%20Ass…
It's 25 basis points, what on earth are they waiting for?
i think it's a fair decision considering the economic condition in eu and asia. If they raise the rates now, the foreign economy will collapse
If the US raising rates by 25bps collapses foreign economies, we have much bigger problems.
The fed missed the opportunity to raise rates a while ago and now that things don't look perfect they think that waiting until it looks again is the best path, but it probably isn't going to work that way. It's going to get worse from here and then look forward to negative interest rates when they realize they need expansionary monetary policy with the current set of tools. I'd love to know who the one person that put negative rates was and his or her rationale, because I guarantee you it was something along these lines.
Lloyd Blankfein said rates will probably rise in December or later if needed at all.
How much longer can we have such low interest rates before everything overheats? Given where the domestic economy is, if they can't raise rates now, when will they ever be able to do so?
First, I'd like to address two posts.
1) Foreign economies will not collapse if the Fed raises by 25 bps.
2) Are things not already overheated?
Second, close to $400B USD has flowed into yield products (MLPs, high dividend yield stocks, yieldcos, high yield bonds, etc) since the financial crisis. This sort of ZIRP that we've been in for years now has been grossly misaligning investor risk tolerances, in my opinion. If you dice up the S&P 500, the top 20% of companies based on dividend yield are the most expensive they have ever been, by far. MLPs are trading at 40-45% premiums to the S&P 500 even with the collapse they've had so far thus year.
In my opinion, at the end of the day the Fed and Yellen are wishy-washy and waiting for a perfect time to start raising rates but there will never be a perfect time. There will always be some foreign economy that isn't doing well or stock market volatility or whatever other variable.
Also, let's not forget the context of the past. In September of 2006, nine years ago now, the federal funds rate was 5.25%. Granted, in the 2 years following the bursting of the tech bubble the rate got down to 1%.
I think the longer this drags on the worse the hangover will be.
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