Both Citi Bank and JP Morgan stated expect a recession for the next 3 yrs.....SO why is the Federal Reserve raising interest rates tomorrow?

2015-12-15T16:52:56-05:00

The Federal reserve is expected to raise interest rates at least 1/4 % tomorrow. With all of the indicators down and predictions of being in a recession for the next three years, why in the world is the Federal Chairman Janet Yellen going to raise the rates tomorrow...and it's predicated by next year at this time......according to Yellen that rates will be about 1.5% higher than what they are today....She predicts rates will be raised a little every 12 weeks.

I think Yellen has been talking about raising the rates since the day she took office last year that she has to keep true to her word, plus rates have been artificially low for so long, she probably feels this will be her only chance to hike the rates cause once the recession starts, she won't be able to do it.

Do you think the FEDS should raise the rates tomorrow?

Response by LTC Stephen F. made Dec 15 at 2015 5:23 PM

2015-12-15T17:23:24-05:00

Sgt Kelli Mays since it has some time since I was familiar with the Federal Banking System I decided ti dig a little into the what, how and why specific rates might be raised. I found a Washington Post article from yesterday which seemed reasonable so I quoting it in part.
"Raising rates, however, is only the first step in getting the economy -- and Fed policy -- back to normal. The process will likely take several years, and there is heated debate over whether the pre-recession standards for a strong economy and appropriate monetary policy are even achievable.
After deciding to increase rates, the first challenge facing the Fed is exactly how to do it. Historically, the central bank has set a target for the federal funds rate -- the amount that banks charge to lend to each other overnight -- and bought and sold Treasury bonds on the open market to hit that goal.
But that method will prove too unwieldy now that the Fed has amassed a balance sheet of more than $4 trillion. Instead, the central bank hopes to manage the fed funds rate by changing two other rates: the interest it pays to banks for reserves held at the Fed and the amount it pays other financial institutions, such as money market funds, for short-term trades known as reverse repurchase agreements. The former is expected to act as a ceiling on the fed funds rate; the latter a floor.
The mechanics are complex, highly technical -- and untested on a broad scale. Still, the Fed has been conducting smaller trials for the past two years and is confident the experiment will work."

https://www.washingtonpost.com/news/wonk/wp/2015/12/14/the-federal-reserve-will-likely-raise-interest-rates-this-week-this-is-what-happens-next/

The Federal Reserve will likely raise interest rates this week. This is what happens next.

The U.S. central bank is expected to finally raise interest rates this week. This is what happens after.

Response by 1SG Private RallyPoint Member made Dec 15 at 2015 6:16 PM

2015-12-15T18:16:11-05:00

Question is, a recession in what sector?
If those two banks are suggesting it may occur in the lending and mortgage industry due to rising interest rates (logical), then I would say no $#!t, Sherlock.
What makes sense is that those banks are putting out earnings warnings and announcing adjustments to their shareholders in their business model to compensate.

Response by SGT Jerrold Pesz made Dec 15 at 2015 6:24 PM

2015-12-15T18:24:45-05:00

I don't know but it is way past due. I am sure that most don't agree but as far as I am concerned the higher the better. Like many seniors I don't owe any money and I was making a pretty good chunk from interest. The decision to cut rates to pretty well zero to "help the poor" cost me several thousand bucks a year. I am ready for the Carter years with interest rates out in space.

Response by CAPT Tom Bersson made Dec 15 at 2015 7:23 PM

2015-12-15T19:23:54-05:00

I'm not sure about a recession. The Fed thinks that rates have been too low for too long and that the economy is much better than it was 8 years ago. Which is true.

Response by CAPT Kevin B. made Dec 15 at 2015 8:49 PM

2015-12-15T20:49:49-05:00

I like LTC Stephen F. response about some "corrective" mechanics. Better yet, your question should be "How can the FED react to a recession when their interest rate is zero?" I expect the FED is positioning towards what scenarios can likely play out over the next few years.

Response by PO3 Private RallyPoint Member made Dec 16 at 2015 7:41 AM

2015-12-16T07:41:28-05:00

It is no longer about US. It is about the USD. Get it? Yellen forced to raise the rate, because if she don't, we will lose the reserve currency of world status. That will be the end of us, under current condition. The day for USD is numbered ....

Response by LTC Kevin B. made Dec 16 at 2015 8:00 AM

2015-12-16T08:00:05-05:00

The Fed Res wanted to raise the rates long ago, but they've waited until the economy has clearly shown that it is strong enough to withstand raising the rate. It apparently now is, so they're looking to start raising the rates. I don't know where you're getting the "recession for the next 3 years" prediction, but you can always find economists predicting recessions (and a 3-year recession would be almost unprecedented). We've had sustained growth for over 6.5 years now (since June of 2009), so the clock is ticking on an eventual recession. The economy moves in cycles, and no politician or Fed Reserve chair can prevent one forever. However, it certainly gives plenty of opportunities for politicians to throw out empty rhetoric that they can prevent them.