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Fed Already Missed Rate Hike Window Of Opportunity – Jim Rickards

(Kitco News) - As markets await the Federal Open Market Committee meeting Wednesday and Thursday to find out if the central bank will finally pull the trigger on interest rates, one best-selling author says the Fed already missed its window of opportunity.

“[T]he Fed missed an entire interest rate cycle,” said Jim Rickards, author of Currency Wars, in his newsletter with West Shore Funds.

“The time to raise rates was in 2010 and 2011 when liquidity was plentiful and the economy was able to withstand a modest rate increase,” he added, noting that if the Fed had raised rates in that timeframe, the central bank would be in a better position to cut rates today now that the economy needs help.

According to Rickards, the Fed has markets and Wall Street foolishly convinced that it can and will raise rates when, in fact, the central bank – and the global economy – is in no position to withstand it.

“The only policy that makes sense is new easing through negative interest rates, more forward guidance or more QE; but there is almost no chance of this happening – at least not yet,” he said.

Rickards explained that if the Fed makes a move on rates on Sept 17, it will lead to a potential emerging-markets meltdown. However, if officials don’t raise rates, but continue to insinuate imminent rate increases, Rickards said to expect more market volatility as seen since early August.

The Fed has really put itself in a corner, Rickards continued, because it will either “commit a disastrous policy error by raising rates in a weak economy” or “destroy its credibility by failing to raise rates after repeatedly saying it intends to do so.”

Rickards said he expects the monetary policy-makers to choose “Door #2,” which he explained would mean no rate increase but more “tough talk about increases in the near future.”

“This will keep the dollar strong, put more pressure on China for devaluation, continue the emerging markets capital outflows, and cause a resumption of the Fed guessing game and the volatility that goes with it. The rest of September and October will look like August – only worse.”

By Sarah Benali of Kitco News; sbenali@kitco.com
Follow me on Twitter @SdBenali

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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