A Good Rate Hike for Europe

Ready for a US Rate Hike?

Why the Fed Should Postpone Rate Hikes

In early 1993, the inflation rate increased slightly, resulting in part from the one time hike in the VAT rate.

Even the doves might support a rate hike in September to counter act the charge that they are being bullied out of a September hike by Sarkozy.

Indeed, even the markets were fooled, giving the ECB a good grade for its unremarkable rate hike.

I am glad that the partridge gets fed, at any rate.

Others spoke out as well, and the futures markets quickly predicted another 25 basis point rate hike in March.

So the Fed could, in principle, decide to raise the federal funds rate even before the unemployment rate reaches 6.5 .

But such an insignificant rate hike will do little to relieve long term pressures, because investors will expect more rate hikes and move money into China, increasing upward pressure on the yuan s exchange rate.

Japan s Tax Hike Test

On a long hike.

At the ECB press conference in early July, Trichet signaled at least one more rate hike either in September or October.

But the recent good economic numbers coming out of France should make an October rate hike easier for French politicians to accept.

They're going on a long hike.

These incentives are offered in the form of a rate paid for electricity fed to the grid.

The ECB s paltry rate hike in December, together with the supine promise of no plans for further monetary tightening, demonstrates that Trichet is no Duisenberg.

Although the meager rate hike was presented as a consensus of the ECB s Governing Council, it soon became apparent that the decision had been controversial.

Trichet even had to rescind the rate hike he had signaled for September, though he still claims the increase has been merely postponed, not abandoned.

At the ECB press conference in early July, Trichet signaled at least one more rate hike either in September or October. Some Council members are known to support two more rate hikes before year end.

Of course, a US recession will also bring further Fed interest rate cuts, which will exacerbate problems later.

The Fed was late in beginning the interest rate normalization process, and it is now paying a price.

Under these conditions, the Fed will want to raise the interest rate to prevent an acceleration of inflation.

That is how Fed bond purchases have historically increased the stock of money and the rate of inflation.

Fed Up with the Fed

The Fed is buying Treasury bonds and long term mortgage backed securities at a rate of 85 billion a month, equivalent to an annual rate of 1,020 billion.

First, the divergence of monetary policies between the US and other major economies is already universally understood and expected. Thus, the interest rate differential, like the US rate hike itself, should already be priced into currency values.

A tax hike is only part of that.

You hike around, you see something like this.

Come on, folks. Anybody gonna hike that sum?

Oh, we had a splendid hike. Quite exhilarating.

In the previous tightening cycle, which began in 2004, it took the Fed two years to normalize the policy rate.

At that point, the Fed can focus on its fundamental mandate of preventing a rise in the rate of inflation.

However, late last year, Everbright Bank and some others began offering fixed rate mortgages. Take up has been slow, but the April 2006 surprise hike in bank rates may help to sow greater public awareness of interest rate risk.

First, the Fed is trying to give relatively specific guidance about the future path of the federal funds rate (the overnight rate at which commercial banks lend to each other).

The Fed pumped money into the US economy and slashed its main interest rate the Federal Funds rate from 3.5 in August 2001 to a mere 1 by mid 2003.

You can hike for days and not encounter anybody.

It's kind of out past Mars. It's a hike.

He's taking them on a hike to Inspiration Point.

For the first time, the ECB president was willing to admit publicly that the Governing Council had discussed the pros and cons of a rate hike at the meeting.

This threat took a heavy toll on the ECB s credibility, since an interest rate hike in the midst of the most serious financial crisis in decades was obviously absurd.

This implies an interval of two months between interest rate moves instead of the three month interval that has become standard ECB practice in the current interest rate cycle. The next rate hike in the normalization process is expected in October, two months after the expected August move.

The people are fed up! The people are fed up! The people are fed up!

The Fed could, in principle, limit inflationary lending by raising the interest rate on excess reserves or by using open market operations to increase the short term federal funds interest rate.

This is precisely what happened in September, when the financial crisis made it impossible for the ECB to proceed with the interest rate hike that it had announced in August.