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timber1956

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22/02/17

08:54

Post #: 22798664
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Originally posted by Crom Valen ↑

More below on the debt ceiling battle and how that will impact on the Fed re rate rise in March.....

http://seekingalpha.com/article/4047742-march-hike-debt-ceiling-deadline

No March Hike With Debt Ceiling Deadline
There is no way the Fed is raising rates with a debt ceiling debate looming.
The Fed does pay attention to politics when it affects the economy.
Risk of a government shutdown is no small matter and will be included in the Fed's decision.
The next Fed decision comes in the midst of a major government battle. This debt ceiling battle is something different. This battle will have increased influence from President Donald Drumpf's Office Of Management and Budget director Mick Mulvaney. Mr. Mulvaney has been a budget hawk and central in past battles. That in combination with how President Drumpf could react to the debate could force the Fed to remain on hold.
Next Fed Decision March 15th
We recently showed that the Fed will want to preview if a rate hike is imminent. They don't want to surprise markets.
This rate hike though has a blackout period that surrounds the all-important non-farm payrolls number which we expect to be "huge."
Their blackout around the number probably holds them from hiking in March. They will not be able to publicly preview imminent intentions if the number does end up being "huge" as we expect.
Fed Has Another Issue, A Political One: The Debt Ceiling
Leading up to the expiration of the debt ceiling on March 15th will be a major Washington battle.
The debt ceiling has been a bargaining chip and has typically only been resolved in the final hour.
That final hour is after the Fed decides to hike or not.
That probably holds the Fed from moving.
Fed Cares About Politics
The Fed's main job is to help steady the economy. While the Fed constantly says they are not political they do admit to take into account policies that will affect the economy.
If the government were to not pay their debts a major crisis could ensue spiking interest rates. That would of course affect the economy.
The S&P downgraded US debt for the first time in history in 2011 because of these battles.
It is a political, economic and global risk.

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@Crom Valen

"Fed Has Another Issue, A Political One: The Debt Ceiling"

US government debt levels and the Debt Ceiling aren't the Fed's problem. That problem belongs to Treasury Secretary Munchkin and the yellow brick president.

The Fed's mandate is to hold inflation at or below 2% (by the accepted measure) and to make sure that the banking system runs smoothly. They don't have authority over the budget...
3 Upvote

0 Great analysis

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