{"id":873,"date":"2016-03-17T10:29:30","date_gmt":"2016-03-17T10:29:30","guid":{"rendered":"https:\/\/www.antya.ca\/research\/the-immovable-federal-reserve-from-goldilocks-to-shackles\/"},"modified":"2026-02-17T06:27:34","modified_gmt":"2026-02-17T06:27:34","slug":"the-immovable-federal-reserve-from-goldilocks-to-shackles","status":"publish","type":"post","link":"https:\/\/www.antya.ca\/research\/the-immovable-federal-reserve-from-goldilocks-to-shackles\/","title":{"rendered":"The Immovable Federal Reserve \u2013 From Goldilocks to Shackles"},"content":{"rendered":"
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\u201cThe Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.\u201d<\/p>\n<\/div><\/div>\n<\/div>\n

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\u201cThe Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.\u201d<\/strong><\/em> With those words of wisdom the wizards from\u00a0the Fed left us to fend for ourselves. Although the Federal Reserve likes to anchor its expectations and forecasts on the basis of U.S. economic data, in my view, negative interest rates in the EU, Japan, Switzerland, Sweden and Denmark are impacting\u00a0Yellen & Company.<\/p>\n

At a time when much of the developed world is trying to inflate its economy by penalising banks, any attempt by The Fed to\u00a0increase the interest rate differential between the U.S. and the rest of the world, would result in additional strength for the U.S. dollar. The dollar which is already approaching all time highs as illustrated in Figure 1 could derail the U.S. export train. Negative rates and competitive devaluations from Japan, China and EU are already causing significant dislocation in global capital flows. By staying pat, the Fed is tacitly playing the game of beggar thy neighbour, and that I believe is taking the whole globe into uncharted territory.<\/p>\n

Figure 1: The U.S. Dollar \u2013 Strong and Gaining Strength<\/strong><\/p>\n