Are you shocked? You shouldn’t be. The Fed’s mini-quarter of a point increase in interest rates yesterday was long-overdue—we’ve been saying so for years (read here, here, here,and here)—and the three more increases expected for next year fall well short of our 4% target. Why? Because the 90-day Treasury needs to get to 4% and it needs to get there pronto, plain and simple.
The North Star, as Dick Young refers to the T-Bill, which has been lost in the night sky for years now, is beginning to flicker (see the big jump in rates on the chart below).
It’s been a long-cold winter. Retirees and savers have been paid squat, a savings tax no-doubt, from a misguided zero-point-zero percent interest rate experiment. Those living on Main Street have been the ones footing the bill, not NYC Wall Street banks.
As far as Yellen and Co. are concerned, they can thank President-elect Donald Trump for the early Christmas gift—the Trump rally. And this is just the beginning. A Trump White House will provide the much needed confidence a politicized Fed needs to make its stair-step-to-heaven quarter point increases (should be much faster) to get the North Star shining bright, for all the world to see, again.