Warren Buffett: 'Tough For Fed To Raise Rates' In 2015
The Fed may raise interest rates sooner rather than later
U.S. stock investors may be bracing for further signs next week that the Federal Reserve could increase interest rates sooner rather than later, with retail sales expected to rebound after two straight months of declines.
A pickup in retail sales could show consumers are benefiting from sharply lower oil prices, but analysts say spending in February was likely curbed by unusually harsh weather in parts of the United States.
Friday's stronger-than-expected jobs report boosted expectations of a U.S. rate increase as soon as June, causing the market to sell off.
The S&P 500 ended the week more than 2 percent off its March 2 closing record high, while the Nasdaq was more than 70 points off the 5,000 mark, which it hit this week for the first time since March 2000.
Comments from some Fed officials underscored expectations of a June rate hike. Among them, Richmond Federal Reserve President Jeffrey Lacker repeated his view that the Fed should raise rates in June.
"The Fed is back at the top of the circle" in terms of the investor focus, said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
"I think they're feeling some pressure to show that they really are data driven. The economy has been getting better, and what I think they're trying to do is overstay the party to make sure the economy really is better."
In the jobs data released Friday, unemployment dropped to a six-year low of 5.5 percent last month, within the range the Fed considers to be full employment. A Reuters poll conducted following the report showed many of Wall Street's biggest banks are more convinced the Fed will raise rates in June.
While a stronger U.S. economy is better for the U.S. stock market in the long run, investors have worried that if the Fed raises rates too soon, it could dampen growth in an economy that has been slow to recover.
Besides U.S. retail sales, next week brings the preliminary March reading on consumer sentiment from the University of Michigan. Sentiment unexpectedly fell in February from an 11-year high, adding to recent worries about spending.
Apple, which rose 0.2 percent on Friday after S&P Dow Jones Indices announced the stock would be added to the blue-chip index this month, will remain in focus next week when it is expected to unveil the long-awaited Apple Watch in San Francisco on Monday.
Also on Monday, the European Central Bank is due to begin its one-trillion-euro stimulus plan, an effort to jump-start the struggling euro zone economy by buying bonds.
That could increase volatility, said Jeff Carbone, managing partner at Cornerstone Financial Partners in Huntersville, North Carolina.
"You look around the world and you've got a deflationary" environment in many countries, he said. "A rise in interest rates is knocking at the Fed's door, but there still doesn't seem to be enough strength out there to make it happen."
What Is The Fed’s True Mandate? – Former Fed Board Member
With the Federal Open Market Committee (FOMC) policy meeting in the rearview mirror, one former Fed member says the central bank may not be following the mandate it was given by Congress.
“There is a big difference between the Federal Reserve’s mandate to maintain ‘stable prices’ – as enunciated in the Federal Reserve Act – and the Fed’s self-selected target of 2% annual inflation,” said Robert Heller, former member of the U.S. Federal Reserve Board of Governors, in a column posted on Project Syndicate Thursday.
“So how is it that policymakers have managed to substitute the latter for the former?” he questioned.
According to Heller, the 2% inflation objective is now at the forefront of FOMC decision making, adding that “increasing the rate of inflation is now the stated objective of Fed policy,” even if Congress did not give the Fed a mandate to pursue such a goal.
“The Federal Reserve Act is explicit: the Fed should achieve ‘price stability’ for the U.S. currency, along with moderate interest rates and maximum employment. As long as inflation is somewhere between zero and 2%, the Fed should declare victory and leave it at that,” he said.
In its latest policy meeting Wednesday, the FOMC reevaluated its inflation forecasts. For 2015, the central bank expects core Personal Consumption Expenditures (PCE), which strips out volatile food and energy prices and is its preferred measure of inflation, to rise between 1.3% and 1.4%, down from December’s forecasted range between 1.5% and 1.8%.
A the same time, the monetary policy statement said, “the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of lower energy prices declines and other factors dissipate."
Heller served as a Fed committee member from Aug. 19 1986 to July 31 1989.
Feds true mandate is to provide more for the rich. Period.
Buffet should know - after all the FED is doing what he (and a couple of others) orders them to do
Buffet should know - after all the FED is doing what he (and a couple of others) orders them to do
Don't know that (if FED is doing what he tells), but Deutche bank stopped liking him. Might be in the line of it
Fed's Lockhart sticks with June to September liftoff, despite growth downgrade
Atlanta Federal Reserve bank president Dennis Lockhart said on Wednesday that the United States remains on track for a likely interest rate hike in the June to September period, with a weak first quarter likely to give way to stronger growth.
"The weakness of the first quarter got my attention. I still believe the factors are transitory," Lockhart told reporters at a monetary policy conference here. "We will see a pick-up."
Why don't they simply tell that they are not going to raise the rates? Do they some pleasure in constant lying?
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Billionaire Warren Buffett said he does not expect the Federal Reserve to raise interest rates anytime in 2015 due to the strong U.S. dollar and the global uncertainty. He stated this while discussing several topics in an interview on the Fox Business Network on Wednesday.
"It'd be very tough for the Fed to raise rates. That would exacerbate the problem. I don't think it'll be very feasible to do. I think it would have a lot of international repercussions," Buffett said in the interview with Fox Business while discussing the U.S. economy.
Buffett, chairman and CEO of investment manager Berkshire Hathaway, Inc. (BRKa: Quote, BRKb), stated that with the currency close to the highest level in more than a decade, it has become cheaper for Americans to buy imported goods.
Also, annual inflation is running well below the Fed's 2 percent target.
Despite concerns expressed by Buffett and others, the Fed is likely to raise interest from near zero, possibly as early as June.
Rates have been near zero since December 2008. The strong dollar has also pushed long-term US Treasury yields to record lows.
Buffett added that the last asset he would want to buy is a 30-year government bond as the US 30-year debt traded at 2.22 percent on January 30, the lowest yield since at least 1977 when the Treasury began regular sales of the securities.
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