I wrote earlier that the sooner the Fed hikes, the better. Here’s the opposing view from an anonymous colleague:
The FED is between a rock and a hard place. We are absolutely addicted to easy
money which has caused a very big debt bubble, to name just one side effect. The leverage in the marketplace is staggering. We have inarguable evidence of cost-push inflation. Oil has hit $40 per bbl. OPEC has been very intransigent up to the moment. Is this the time to start raising rates?
I gotta’ think not yet. First of all, there is a tendency not to take cost-push inflation seriously. As a matter of fact, I’ll bet they are pretty comfortable with cost-push because the thinking is that: a. the jawboning they are doing on higher rates has “worked” so far in that an awful lot of spec-monkeys have been shaken out of the commodities trees and b. as China cools, commodities prices will soften. Wasn’t this just mentioned by the Maestro? Absolutely. So there’s a hint right there. So maybe they are not so alarmed unless inflation gets to the demand-pull stage. (Ask the auto industry if they’re seeing any demand-pull. Yee-ha).
And as mentioned above about lack of wage growth, the ugliest form of all inflation, wage-push, is not even close to being an issue.
Last, do you think that Novak got the story about the first hike coming in the fall during a vision? There is about a 99% possibility that it was leaked to him with a goal towards becalming the markets by giving him a “schedule”.
Valid points all.