Yep, Europe Has Killed Any Chance Of A Rate Hike

Ben Bernanke


The latest FOMC minutes are out, and the outlook for the economy is predictably mixed. Things are stabilizing but restrained. Unemployment will remain elevated throughout the year.This part is interesting (as noted by ForexLive):

Economic conditions abroad, especially in several emerging Asian economies, continued to strengthen in recent months, contributing to gains in U.S. exports. However, participants saw the escalation of fiscal strains in Greece and spreading concerns about other peripheral European countries as weighing on financial conditions and confidence in the euro area. If other European countries responded by intensifying their fiscal consolidation efforts, the result would likely be slower growth in Europe and potentially a weaker global economic recovery. Some participants expressed concern that a crisis in Greece or in some other peripheral European countries could have an adverse effect on U.S. financial markets, which could also slow the recovery in this country.

The strengthening US dollar was already one big disincentive to raise rates, and now it’s clear that Europe will ensure it will be a long time before anything changes.

Even asset sales are on hold:

No decisions about the Committee’s longer-run strategy for asset sales and redemptions were made at this meeting. For the time being, participants agreed that the Desk should continue the interim approach of allowing all maturing agency debt and all prepayments of agency MBS to be redeemed without replacement while rolling over all maturing Treasury securities. Participants agreed to give further consideration to their longer-run strategy at a later date.

The market is coming back a bit.

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