Counterpoint: Will the Fed's anticipated move do anything?


10 straight rate increases with only minimal evidence of inflation or of a tight labor market have led me to criticize again and again the rate increases levied by the Fed.

But what if they aren’t having any effect? What if the market has made them irrelevant–or at least less relevant? Today’s WSJ reports on the flat yield curve and shows that these rate increases have had little effect at all on the credit market.

It’s hurting banks because they can’t turn around and charge higher rates for longer term loans, but people can still get the loans, due largely in part to securitized mortgages like REITs, which don’t depend on banks for their rate (at least as much).

So, it’s possible that clever securitization really has minimized the impact of these Fed hikes, and, so, it’s possible that the announcement that should be coming out soon won’t spike the market.

But I’m still not convinced. Trouble in the financial sector (in this case, the inability of banks to make money from lending) almost always spells trouble.