Submitted by Taps Coogan on the 16th of October 2018 to The Sounding Line.
Peter Fisher, a Dartmouth Tuck School of Business senior fellow, recently spoke with CNBC about the outlook for the Fed interest rate hikes at this late stage in the economic cycle, warning that the Fed “has no idea where rates will be in a year or two.”
“I think Jay Powell has been doing a really good job of trying to walk back the Fed’s extraordinary forward guidance. The Fed doesn’t know where rates are going to be a year or two from now and they’ve been promising that they know how to tell us that for the last eight years… and so we’ve got to learn to walk back from forward guidance. Whether they do (the Fed) or we do (investors), we’ve got to discount it…”
“The equity correction, things got ahead of themselves. Look at the Facebook repricing over the summer. That should have warned lots of investors, lots of momentum and tech stocks in general and the market in particular, not just Facebook. Animal spirits have been driving stocks higher for two years. Better cash flows have been driving stocks higher for two years. Real rates were going to catch up. That’s not a news item. The market’s got to adjust, but the uncertainty ahead of us, I think that’s still ahead of us.”
“It’s this late cycle problem… It means that we may have to raise rates more than the market expects if the economy accelerates more than we were looking for, but we might have to ease sooner than the market expects cause it might turn on us. We don’t know where the top of the cycle is. I think they should just throw out the Dot-Plot. Even if they don’t (the Fed), we investors have to. We’ve got to start ignoring that cause they don’t know where rates are going to be two years from now. That’s silly. What’s it going to look like when we look at the the Dot-Plot and a third of the dots are going up, a third are going sideways, and a third are going down?”
There is more to the interview so enjoy it above.
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