FOMC: Has The Die Been Cast?
December 14, 2015
Dennis Gartman has been directly involved in the capital markets since 1974 and has been publishing his daily commentary, The Gartman Letter, since 1987. Mr. Gartman is a strategic partner with the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN) and lends his institutional insight to educate advisors and investors about trading gold in different currency terms.
All attention is of course this week upon the FOMC meeting, with the debate still open as to whether the Fed shall or shall not move to raise its o/n fed funds rate from zero to 0.25%. At this point we are of the School of Thought that the Fed really hasn’t any choice: it must move to allow the funds rate finally to “Lift Off” for it has far-too-often hinted at that decision that not to do so would seem horribly confusing and materially ill-advised. The proverbial monetary die has been cast; far too many Federal Reserve spokesmen and women have been out in front making the argument that the time for the “Lift Off” has come and that the unemployment rate certainly is low enough to warrant action even as deflationary trends seem to obtain in the commodity markets and even as stock prices plunged last week.
We suspect that when all is said and done, the FOMC will vote with a dissent or two to tighten policy ever-so slightly but that the next round of higher rates for the o/n fed funds rate may be mid-year next year…if then. The Fed erred badly in not beginning the process of allowing rates to “Lift off” a year or more ago. It needs to have had the funds rate to 2-3% already, so that when the inevitable next recession occurs that it will have had the monetary weapons in place to fight those recessionary forces. Now it shall be left to fight that inevitable recession with tools we’d rather not see involved, including more rounds of QE and the like.
Concerning gold the market avoided its “normal” Friday sell-off last week but apparently there is aggressive selling today late in Asia and early thus far in Europe. The market is selling down on the concerns regarding the Fed; on the continued weakness of crude oil and the strength this morning in equities around the world.