Credit Suisse sees four U.S. rate hikes in 2018 after budget deal (PCE Deflator YoY still below 2%)

This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.

NEW YORK (Reuters) – Credit Suisse’s U.S. economists said on Monday they now expect the Federal Reserve to raise key U.S. short-term borrowing costs four times in 2018, one more than their earlier view for three rate hikes, following last week’s U.S. budget agreement.

”The FOMC has already boosted their growth outlook for 2018 in light of the tax bill passed in December and we anticipate

another upward revision to their growth forecast at the March meeting,” the Credit Suisse economists wrote in a research note.

”With the economy near (or above) full employment, prudent risk management suggests the Fed ought to accelerate their tightening in response to a large positive demand shock,” they said.

Prudent? Like keeping The Fed Funds Target rate near zero for 10 years? While creating enormous asset bubbles?


Yes, the US is near full employment, but inflation (PCE Deflator) is still below 2%.


While hourly earnings are still below levels seen in 2007.


Four times at 25 basis points each equals 100 basis points in one year. According to the Rudebusch calibration of The Taylor Rule, that will leave The Fed with only 373 basis points to get to where it should be. That would be over another three years (assuming nothing changes).


Let’s see how the Powell-led Fed Open Market Committee (FOMC) reacts to this week’s inflation news.


Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I am a contractor for Money Map Press, publisher of Money Morning, Sure Money, and other information products. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. In some cases I receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.

Leave a Reply