What Is The Deadline For The Fed To Raise Interest Rates?

Under the circumstances of the external impact of China's devaluation of the RMB or the referendum of Britain's withdrawal from Europe, it may spread directly to the US economy directly or through the financial market.

The failure of monetary policy decisions is usually the result of the Federal Reserve lagging behind the economic curve, that is, when the economy is overheated and vicious inflation makes the Fed feel unprepared, it is forced to accelerate its tightening policy.

But some analysts believe the Fed has missed an opportunity to normalize interest rates a few years ago.

Lance Roberts, chief investment strategist at Clarity Financial, said: "after the first round of quantitative easing (QE1), economic growth has been greatly improved, so the Federal Reserve should start the process of normalizing interest rates so that it can have the tools of the next recession."

Roberts believes that the US economy may shrink in 2017, but his main concern is that the Fed's policy raises asset prices and stocks, especially lowering interest rates, allowing companies to buy bonds and buy back shares.

The S & P 500 index closed at 2090.54 on Wednesday (May 25th), 2% lower than its historical high last year.

Roberts said: "if the Fed moves ahead and starts raising interest rates, the S & P 500 index will not be at the current level, but the 1500~1600 interval."

Almost no one in Wall Street thinks the current share price is cheap.

The FactSet tool shows that the S & P 500 index has a non GAAP criterion P / E ratio of 16.5, which is 10 years above average.

In addition, few people will think of bubbles in the market.

George Pearkes, a macroeconomic strategist at Bespoke investment group, said: "the stock market is expensive, but in the past two years, the forward price / earnings ratio of the stock market has continued in the 16~18 range."

But in fact, most of the increase in the S & P 500 since 2009 has been driven by a rise in the P / E ratio.

In other words, stock prices have risen to more than earnings growth.

At that time, the stock market followed fundamentals, such as long-term earnings and dividend growth, but in the short term, the two directions tended to increase too much.

Others are worried about the prolonged and ultra loose.

The Fed has been in trouble, and the Fed is facing a series of increasingly bad resolutions.

Former Dallas Federal Reserve Chairman Fisher (Richard W. Fisher) consultant Danielle DiMartino Booth said that it is not appropriate to raise interest rates at present. When interest rates were raised, it was in 2013.

The index is actually better.

Booth believes that the zero interest rate policy causes capital expenditure to be weak while increasing the debt burden of enterprises.

"What the Fed has been doing for years is to buy its own time, but the business cycle will eventually end," she said.

She also believes that future monetary policy will depend on the results of the United States election.

She said: "if Hilary is elected president, she may appoint two more dovish Fed officials, so we may continue to maintain low interest rate policy for a longer time".

Tim Duy, senior director of the Oregon Economic Forum, said that if the Fed had already raised interest rates by 25 basis points, the business model might have changed, which is questionable.

He said: "

Maintaining the low position is not driven by the Federal Reserve, but driven by the global economic situation ".

He pointed out that the Fed could not raise interest rates simply by raising short-term interest rates.

In fact, Duy believes that if there is a mistake, it should be the Federal Reserve too fast and too radical to cut down on the purchase of debt, so that the expected tightening policy will be heated up.

Duy said: "too tough is actually counterproductive, pushing up US dollars and suppressing commodities. In fact, they have tightened financial conditions too early."

Pearkes also disagrees that the Fed should start tightening policy as soon as possible.

He said: "people who believe that the zero interest rate policy and the increase in asset purchase period have forgotten the benefits.

QE is equivalent to pushing up the real interest rate by three percentage points, less than 0%.

In fact, the European Central Bank decided in 2011 that it was time to raise interest rates, but it had no effect, and the euro zone economy was in recession and it was still difficult to restore kinetic energy.

Perhaps the 99 problem in the stock market is that the Fed is only one.

Whether the Fed's decision is wrong or not, there may be a new round of correction in the stock market, because the Federal Reserve is still one of the most vulnerable factors because of various reasons other than monetary policy.