FED Rate Hike

Dated: 09/04/2014

Views: 725

"Our assessment so the degree of slack must be based on a wide range of  variables and will require difficult judgments about the cyclical and structural influences in the labor market"

"while these assessments have always been imprecise and subject to revision the task has become especially challenging in the aftermath of the great Recession"
Many Investors expect the first rate increases around the middle of next year, a notion top Fed officials have encouraged . But investors are now on  notice that plan could shift as Ms. Yellen who as an academic in the 1970s and 1980s cut her teeth on labor and wage analysis continues her studies.
"If i was sitting on the fed I wouldn't be thinking this is time to pull the trigger," said Form Fed Vice Chairmen Alan Blinder,  a Princeton university professor and friend of ms Yellen.  The decrease in slack is "modest and opposed to a titanic amount" he said. Yet "its shrinking, which is why you see the Fed thinking and speaking a little more hawkishly over time".
The discussion of wages in Jackson HOle was emblematic of the broader job market is a puzzle Ms. Yellen is trying to solve.
"the low rate of wage growth is, to me , another sign that the feds job is not yet done."
A research paper released in January by two senior Fed Economists, Mary daly and Bart Hobijin, argued that pay is being temporarily restrained by "pent-up wage deflations."  As is often in the case in downturns, employers were reluctant to cut pay during the recession.
They may now be in a fleeting period of catch up by holding down wages in the early stages of the upturn. If true slow wage growth could be understating the longer run wage outlook and building inflations pressures.
"the current very moderate wage growth could be  misleading signal of the degree of remaining slack said Yellen.
Uncertainty about the wage outlook was echoed by other at the conference . In the U.K., pay growth has averaged 2% even as unemployment has fallen sharply. Ben Broadbent, deputy  governor of the Bank of England, argue d the weakness could be unwound later in the year.
"labor market surveys point to skills difficulties in some areas and to faster growth in the official earnings series in the months ahead," he said. But it is also possible, he warned, that there has been a longer lasting downward shift in wage growth.
This all translates into a challenge for Fed Officials as they consider what message they want to send about rates.
In ms Yellens first meeting as chairwoman in march the Fed stopped tying its interest-rate guidance to the falling unemployment rate and instead offered a general assurance rates would remain near zero for a "considerable time" after its bond buying program known as quantitative easing, ended.
The guidance aimed to ensure that investors didn't jump to a conclusion that as soon as bond buying ended, rates would rise, said James Bullard, the st. louis Fed President, speaking on the sidelines of the jackson Holes conference. With job market indicators becoming more ambiguous as the program nears its end in October, he said the assurance has become stale. "as time goes on and as we end QE, I don't think the guidance will work very effectively , "mr. Bullard said. He and other officials are now considerings how and when to change it and what kind of assurances if any are warranted.
Atlanta Fed President Dennis Lockhart, also speaking on the conference sidelines agreed that these words would need to change but he argued for taking time.
"it depends a little bit on how the data cam in "he said. "I don't think we nee dot be too fast to change that Guidance."
Denver Colorado Realtor -Michael Steffen 
Michael is a motivated realtor specializing with investors and new home buyers located in the following areas; DenverArvada Aurora Bennett Byers Castle Pines Castle Rock Centennial Cherry Hills Village Columbine Valley Deer Trail Denver Elbert Englewood Franktown Greenwood Village Highlands Ranch Larkspur Littleton Lone Tree Parker Sedalia Sheridan Strasburg WatkinsWheat Ridge, Lakewood, Castle Rock, Thornton, Westminster, Evergreen, Golden. Michael Steffen 
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