Elliott Wave Courses | by ForexCycle.com | Sunday, 14 February 2016 05:06 UTC
By Elliott Wave International
For the financial markets, the biggest event of the week starts tomorrow: On Wednesday and Thursday (Feb. 10-11) Fed chair Janet Yellen will appear before Congress to deliver her semi-annual Monetary Policy Report.
"It's huge." That's how one strategist put it this morning, in a CNBC interview about the importance of Yellen's testimony.
Why are all eyes on Yellen? Maybe because by now, almost everyone has forgotten how powerless the Fed appeared in 2007-2009, when none of its measures could stop the financial crisis. Despite the recent market chaos, six years of rising stock prices reaffirmed the notion that the Fed can move mountains. "As the Fed goes, so do the markets" is the current mantra -- so, on Wednesday and Thursday, analysts will be listening carefully: Will Yellen mention the ongoing market turmoil?
If not, then the Fed is focusing on "the positives" like the U.S. jobs and GDP numbers, which makes another interest rates hike likely in March. If Yellen does mention the "turmoil," then the Fed is worried about the markets, making a March hike unlikely.
Basically, it comes down to "rate hike now" -- or "rate hike later." But there is the third option.
A rate cut. And not just any cut, but a rate cut below zero.
Crazy? Look at Europe and Japan, where negative interest rates are already in place. As our December Financial Forecast wrote,
Can this happen here? Yes, says Bloomberg:
"Fed Chair Janet Yellen said in September that negative rates weren’t a main policy option, but that officials would evaluate the approach if needed."
Translation: "Fed officials have said negative rates are possible, though not probable any time soon."
What could push the Fed to make a move like that? Our new, February Financial Forecast explains:
If the Fed indeed is forced to reverse course and drop interest rates below zero, what investment will be a "safe place"?
Read our new report, Risk ON? Risk OFF? Find Out Where Your Money Lies. The editors of our Financial Forecast Service, Steve Hochberg and Pete Kendall, have been tracking a "steady global shift to greater financial conservatism over the last 18 months." They have just published this new report detailing all of their findings. Read Their Complete Report >>
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