Chart du Jour: No Signs of Imminent Rate Hike

The interesting graph below by Morgan Stanley strategist Teun Draaisma, courtesy of The Money Game – The Business Insider, looks at the last few recessions, and specifically the timing of three subsequent economic events: first positive non-farm payroll statistic, the peak in ISM new orders minus inventories, and then finally the first rate hike. As shown, the first two items have not yet taken place. Also, subsequent to recent recessions, rate hikes (green bar) came significantly after the end of the recessions.

“Federal Reserve Chairman Ben Bernanke gave an important speech in Atlanta over the weekend. He defended the Greenspan Fed, saying the policy of low rates in the early 2000s did not cause a bubble in housing. If the Fed plans on stubbornly staying the course with 0% interest rates in 2010, what better way to convey that inclination to investors than by defending the loose money of the 2000s? remarked Brian Wesbury and Robert Stein in the latest edition of Forbes.

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Source: The Money Game – The Business Insider, January 4, 2009.


Originally published at Prieur du Plessis’ International Investment Blog and reproduced here with the author’s permission.