Brainard Comments Push Likelihood of Rate Hike to December

TDC Note – It’s time, once again, for everybody’s favorite TeeVee show, Rate Hike Jawboning! This weeks guest is Lael Brainard, we haven’t heard from Lael, as she is the latest of the clown Fed Heads to join the conversation. Are the jobs numbers meeting expectation, what about inflation or is the “data” still too murky? Let’s tune in and hear how she talks up, or down, the Rate Hike mystery!!

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The drama at the Fed continues to unfold after another high-ranking official, Governor Lael Brainard, expressed comments suggesting the US economy was still too vulnerable for a rate hike. At this point, the governing body seems divided about the health of the economy, which seems odd given their self-proclaimed “data dependency”. Either the data is indicating a growing economy or a shrinking one. Lack of consensus suggests a division in leadership and a delay in any rate hike at least until the end of the year.

Lael Brainard

Brainard spoke yesterday at the Chicago Council on Global Affairs, stating:

Today’s new normal counsels prudence in the removal of policy accommodation,” and that the lack of full strength of the labor market makes “the case to tighten policy preemptively less compelling.”

Even though she was only one of several other officials to speak, Brainard’s traditional dovish stance on interest rates prompted many investors to think her opinions would signal which way the Fed was leaning on a move this month.

Clearly, the message was more “wait and see” with Atlanta Federal Reserve President Dennis Lockhart refusing to speculate on time at all. His reasons centered on the recent stock sell-off last Friday. “Financial markets seem to be very sensitive to the remarks of Fed speakers at the moment,” he said.

The closest Lockhart came to addressing rate hikes came when he suggest the “data over the past few weeks warrants serious discussion of a policy rate increase.” Aside from being ambivalent, Lockhart’s comment highlights the Fed’s hypocrisy when it comes to being data dependent. Peter Schiff explains:

To me, what that means is we should discuss not raising rates, because all of the data we’ve gotten recently is weak … What Lockhart is saying is we need to have a serious discussion about a rate increase. Not that we have to discuss raising interest rates, but maybe we should discuss not raising interest rates. Because if it’s based on the data from just the past few weeks, you would be arguing against an increase.”

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Peter Schiff

Mr. Schiff began his investment career as a financial consultant with Shearson Lehman Brothers, after having earned a degree in finance and accounting from U.C. Berkeley in 1987. A financial professional for more than twenty years, he joined Euro Pacific in 1996 and served as its President until December 2010, when he became CEO. An expert on money, economic theory, and international investing, he is a highly sought after speaker at conferences and symposia around the world. He served as an economic advisor to the 2008 Ron Paul presidential campaign and ran unsuccessfully for the U.S. Senate in Connecticut in 2010.