The Fed is in complete disarray! We are 6 years into the US economic expansion and the Fed still has no idea when it is going to raise rates, how it is going to raise them and what data will finally prompt them to raise rates from zero per cent. Furthermore its economic forecasts are all over the place. Witness the massive and sudden scaling back in growth and inflation forecasts since the last meeting. Then to cap it all, Janet Yellen says they “don’t want to be behind the curve.” She has to be kidding. Interest rates have been at zero for 6 years, despite this being touted initially as an emergency one-off measure, and she doesn’t want to be behind the curve! Actually, as I said yesterday and repeated on the RTHK Radio 3 Money For Nothing program today,┬áthe Fed has missed the boat when it comes to raising rates. It should have done so last year. However, it is now faced with the prospect of having to raise rates when the business cycle and economic cycle are both turning downwards. So the most she will be able to do is maybe one token rate rise this year before it become obvious to all that the massive monetary policy experiment being conducted by the world’s central banks has failed. And one last thing on Ms. Yellen and the Fed; they say that they don’t like to surprise the markets. That hasn’t worked out well for them this time around given the chaos we are seeing in the FX markets today.

Here’s the link to today’s Money For Nothing where I discuss this further