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The Only Thing That Matters For The Rate-Hike Decision

A week ago, we noted Goldman Sachs' 'strawman' that Janet should "think about easing," despite the world's misplaced confidence that rates will rise "inevitably" since the US economy is doing so well. Today, we get to hear what 'god' thinks as the only thing that matters for The Fed's decision is - keep Lloyd happy  - and Goldman CEO Blankfein just said "U.S. economic data doesn’t support the case for higher interest rates."

As Bloomberg reports,

The Federal Reserve’s end of quantitative easing and higher taxes have acted as a brake on the economy and a form of tightening, Blankfein said Wednesday at a breakfast in New York sponsored by the Wall Street Journal.

 

U.S. economic data doesn’t support the case for higher interest rates, Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said.

 

Any decision to increase interest rates should be driven by economic data, he said.

And as we previously concluded, there you have it: the "above trend growth" is dead and buried - because 24 months after Goldman's prediction that the economy is now roaring, Goldman admits the Fed can't hike even 25 bps.

Which is why one can, and should, ignore all Goldman forecasts about the economy.

 

What one should most certainly pay attention to, however, is what Goldman says the Fed will do - you know, for "risk management" purposes - because as we have shown countless times in the past, Goldman runs the Fed.

 

As such, forget a September rate hike. Or perhaps Yellen will listen too carefully to Hatzius and instead of a rate hike, shock absolutely everyone, and instead of a rate hike the Fed will join the ECB, SNB and Riksbank in the twilight zone of negative rates. That, or QE4.

 

And why not: after both the Swiss National Bank and the Chinese central bank crushed investors who thought the banks would never surprise them, why should the Fed not complete the 2015 trifecta of central bank turmoil?

 

After all, the money printers are already running on "faith" and credibility fumes. Might as well go out with a bang.

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Simply put - the only thing that matters for the rate-hike decision is - What Would Lloyd Do?