Yahoo Finance "The Fed wasted a bullet:" veteran trader
The Fed may have skipped following up its December rate hike with another one at this week’s meeting, but one veteran trader said America’s central bank made a mistake by not acting several months ago.
“The Fed wasted a bullet, no question about it,” said Ira Epstein, managing director at Linn & Associates. He maintains that the Federal Open Market Committee should have raised the fed funds rate as early as March of last year.
Although the Federal Reserve said “labor market conditions improved further even as economic growth slowed late last year,” Epstein sees the Fed changing its interpretation of what makes for strong employment data.
“They're going to redo what low joblessness is,” he said. The Fed is “going to start moving that target lower.”
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The headline unemployment rate has been at 5.0% since October, but the underemployment rate is 9.9%, near where it was in June 2008, though well off from its October 2009 peak at 17.4%. Meanwhile, the labor force participation rate came in at 62.6%, among its lowest levels in nearly four decades.
Looking ahead, Epstein is pessimistic the Fed will raise rates in March as many previously speculated.
“March is off the table,” he said. “June is a big question mark. September has probably still got high probability.”
Epstein expects the benchmark U.S. Treasury 10-year yield (^TNX) to be trading around 1.95%, close to Wednesday’s levels in the near term. By mid-summer, he expects a slight uptick toward 2.5% where he anticipates it to close this year—with one caveat.
“That's barring a shock worldwide to China,” he said. “If we start seeing that they slow down even more, my numbers are high. They will drop down.”
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