Source: Daily Reckoning

 

“Fed Chairman Jerome Powell has recently indicated again that he planned to go ahead with another 0.25 rate hike when the Fed meets Dec. 19, which would be the fourth increase this year….What has emerged is a growing fear that the future could be gloomier than many analysts, governments and central bank leaders anticipated. There are now two major factors that could curtail growth in the U.S. One is the Federal Reserve itself. If the Fed were to continue raising rates too quickly, it would cause government, corporate and consumer debt payments to increase. Second, while President Trump’s estimated $1.5 trillion in tax cuts have contributed to boosting U.S. GDP this year, the same impact is unlikely to carry on into next year….The Wall Street Journal reported the Fed is mulling whether to ‘signal a new wait-and-see mentality’ on interest rates at their upcoming meeting in less than two weeks…The fact is that markets remain addicted to low interest rates and central bank credit. But that just keeps the Fed trapped in a catch-22. It wants to ‘normalize’ rates as much as possible after years of heavy support to the markets, but it’s now seeing how markets react without that support. The Fed can tolerate weakness in the stock market, but it fears a complete collapse, which is a very real possibility. So Jerome Powell is between a rock and a hard place.”

 


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