WASHINGTON, June 17, 2015 − As promised, this first of two columns today will be very short. That’s because the real news shows up this afternoon at 2 p.m. EDT when the Federal Reserve issues its nervously awaited minutes which may or may not offer a clue as to when (more or less) the nation’s central bank may begin its long-threatened series of interest rate increases.
Wednesday’s markets have been modestly positive as of 11 a.m. EDT, but the modest volume backing this direction likely indicates a lack of conviction at this point. As we’ve mentioned countless times before, the big traders and insiders almost certainly possess the current Fed pensées right now−illegal but typical in recent years−but they’re apparently unwilling to tip their collective hand just yet. Expect that to get underway sometime between 1:30-1:45 p.m. That’s when we usually get our “tell.”
Consensus is that it’s too late for the Fed to kick interest rates up right now, and will likely wait until at least September before that dreaded first interest rate hike will happen. The consensus can be and often is wrong, however, so one never quite knows; unless, of course, one has enough money to get early access to these inside decisions.
Complicating the Fed’s decision and likely forestalling interest rate increases for now is the indelicate pas de deux being acted out right now between Greece’s Communist government and the socialist European Central Bank (ECB). In this battle of dueling leftist philosophies, the ECB and the other members of the so-called troika−the European Commission (EC) and the International Monetary Fund (IMF)−certainly have the upper hand. That’s because they have all the money Greece needs to maintain their currently toxic, government-centric fiscal charade.
But the current Greek Communist government has a significant ace up their sleeves. Communists don’t really negotiate and don’t really give a damn whether they pay anybody back in even the most nominally capitalist of countries. They’re fully prepared to let the nation slide into chaos and insolvency because, as always, they’ll blame it on the capitalists and imperialists and the people will buy it as they always do. Hence, this dangerous impasse.
The Fed, not wanting to complicate matters in Europe, which are about to come to a head, will likely hold off on interest rate increases for now, rather than complicate that situation further. In addition, despite all the government’s recent happy talk about employment and the economy, there is no growth in the U.S. So making interest rate increases stick without destroying the stock and bond markets require that the U.S. populace drink the Kool-Aid early and often, and thus far that’s uncertain.
Also complicating matters this morning, U.S. oil inventories are down, but oil and gasoline prices are up. Go figure. Logic is getting to be a useless commodity in 2015.
All of which means we’ll watch and wait and report back here Wednesday afternoon as soon as we can read enough of today’s Fed minutes to plausibly interpret the tea leaves. Stay tuned.
UPDATE: It’s now 1 p.m. EDT and markets have slipped into the red. To early to say this is a “tell,” however.