The Path to Interest Rate Normalization
All eyes are on the Fed today. The market does not look for a surprise, for good reason, the problems in the US and Global real economies were structural and have not reacted to the funny money since September 2012 and QE III.
So, deflation continues to accelerate and the real economy and employment are weak. Yes, paper assets and M & A have been hot, but all that does is flow money up the chain, not trickle down as the FED desires.
Maybe, a good question would be, what are normal interest rates, while some may disagree, 2.5 percent is a number that is mentioned as a rate that has been a median over the past some 2000 years, a long time.
So what should Yellen do, maybe let the market find a normal rate by getting rid of what did not work for sure, the 2.2 Trillion of QE III funds. Just let them roll off as they mature.