Data (in)dependent Janet Yellen and her FED cronies decided to raise rates to show us their good faith in the US economy. By raising the rates FED was “signaling their faith” pointing to “improvement of the labor market” but completely ignoring all economic data indicating that the US economy is in reality slowing down and that we are at the beginning of another recession.

Fed hasn’t increased rates with ISM index below 50 since 1986 when they raised them but were forced to lower them again a few months later when a recession hit the US in 1987 (source: Hedgeye).

 

 

Unfortunately, an improvement of the labor market made mostly of part time jobs for economic reasons (where multiple people work full time job and a part time job, because a full time job will not provide them with enough salary to spend) will not provide enough confidence for American consumers to spend their money! And sure enough. The Bloomberg Consumer Comfort index has been declining since September and now reached the worst level since the end of QE3 (source Zerohedge). Americans feel that their economic situation isn’t as easy as it was before 2008. Many feel that they are worse off than before.

 

Source: Zerohedge, Bloomberg
 

Atlanta Fed head Dennis Lockhart called U.S. growth “solid” yet they lowered the US GDP forecast for four times since November. Not so long ago, they lowered the GDP forecast from 3.4% to 2.2% in November 2015, then they supported the rate hike to show faith in the US economy while at the same time admitting that it is actually slowing down and now they lowered the GDP forecast to 0.7%!

 

 

What is this telling us? It indicates that Yellen has never been data dependent, pushed herself into a corner by talking about rate hikes but not doing it and at the end raising rates just to satisfy Wall Street expectations, and save their already questionable “credibility”. The whole rate hike and optimistic US economy forecasts from FED are as phony as the entire recovery indicating what everybody probably knows anyway that FED has either no clue what’s going on or try deliberately lie themselves out of this mess and hoping that it may end well. It will not.

What’s ahead of us is quite scary.