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Will the Fed Increase Interest Rates? Does It Even Matter?
Losing Faith In The Plunge Protection Team: Harsh Reality Setting In?
People are anxious about Ben Bernanke and Co. right now, as the ritual fixation intensifies regarding this week's Fed meeting: "Will the Fed increase interest rates? Will it decrease them? Or will it do nothing at all?!"
Who can blame the public's thirst for an answer? The Fed can't seem to do much right. Amidst the credit industry's cries for help via lower rates on one side, and 'the sky is falling under the weight of inflation' doomsayers on the other, it doesn't seem like there is a solution. But how does asking "When is the next Fed meeting?" or "Will the Fed increase interest rates?" really help you anyway?
Alan Greenspan was a demigod in the heyday of the bull-market 1990s. Now he's even more vilified than his former colleagues. Why the change in portrayal? And why is the old Greenspan bag of tricks suddenly empty? Surely Bernanke isn't that big a departure from Greenspan's style.
Truth is he's not. He's doing just what Alan would have: cutting the current Fed fund rate. But it’s a different market now — and at Elliott Wave International, that's no surprise. The trend is unavoidably down, which is why Steve Hochberg's Short Term Update has this to say:
"Fear will grow when investors realize that no matter the outside forces many perceive to be acting upon prices, the market’s trends are endogenous. As the chart shows, whatever the Fed tries in an attempt to stem the financial contraction, or the Plunge Protection Team (PPT), or the movement in oil prices, or any other exogenous force, the market’s trends are generated internally and are not caused by dynamics outside of internal social mood, which the Wave Principle governs."
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Here's a better question to ask about the Fed: Why do we care? No matter what the Fed rate cut history is, the market ignores it. Something else is unfolding, and you can understand what that something is. Public perceptions of Bernanke and Greenspan move in near perfect step with bearish social mood, regardless of the latest rate adjustment. But the problems associated with the Fed — and the public's misconceptions about the central bank — are just the beginning.
Break free from the The-Fed-Rate-Drives-Everything myth and find out more about the real engine behind the market with Short Term Update, part of EWI's complete Financial Forecast Service. There's a whole lot more at stake than what's on the agenda at the next Fed meeting. You can't afford to wait to find out what that is.
Read Short Term Update free during FreeWeek
Get access to fascinating insights and charts like the one in this story three times a week. Through Wednesday, June 25, you can see everything Short Term Update has to offer for FREE during FreeWeek. Learn more here.