The stock market, gold, silver, and oil all rallied when the Federal
Reserve delivered the widely expected increase in its benchmark interest
rate on Wednesday, the Ides of March. It said that the domestic economy
remained on a path of slow and steady growth. In a statement the Fed
said that the United States economy continued to move along expanding at
a “moderate pace.” The consumers were spending with businesses and
employers were still hiring.
The Fed also noted a recent increase in inflation after a long period
of sideways movement. Prices are now rising at roughly the 2% on an
annual pace that the Fed regards as optimal, however, picking up the rug
reveals that healthcare costs are acting more like oil did during the
1970s. This raises concern that we may be entering really stagflation
and not true inflation driven by expanding demand. The Fed now said its
focus would be stabilizing inflation. They really need to look closely
at the driving forces. As more and more states move into crisis like
California, we will see rising taxation to cover the crisis in pensions.
This will feed stagflation – and prevent rising inflation from demand.
The Fed’s forecasts have moved in the direction of tightening, and
despite what they say publicly, the most serious stimulus is rising
stock prices. There was one vote against the rate hike, Neel Kashkari,
president of the Federal Reserve Bank of Minneapolis, who said that the
Fed’s statement did not provide a reason for Mr. Kashkari’s vote.
However, this is because the real reason behind the rate hike has been
the rise in the stock market.
The computer forecast back in 2011 showed that the trend would change in
2015. Indeed, the first rate hike came that December. The next target
was 2017 and we have seen the rates continue to rise. The next key
target will be 2019.
Here is the current Yearly Array. We still see 2019 as a major target
objective. Note the Directional Changes either side and higher
volatility should begin to appear starting next year.
Honing in with the quarterly level, it appears we should be looking at
the 1st quarter 2018 as the main target. Note the Directional Change
coming the 3rd quarter here in 2017.
We see the resistance standing at 2.25%. So we have a full 1% above the
current level to rise before one must consider the crisis in interest
rates begins. Keep in mind that low interest rates helps government but
kills pensions. Higher rates will help ease the Pension Crisis but
create a budget crisis.