Ex-MPC´s Blanchflower says Fed´s next move will be a cut
Fed underestimated spill-over effects from China
Indicators pointing to a recession
Thursday´s US durable goods report for December showed the country´s central bank made "a major macro-mistake" when it decided to embark on interest rates that same month, an ex-member of the Monetary Policy Committee said.
In an interview with Marketwatch.com, ex-MPC member Danny Blanchflower said that now "there’s a 50/50 chance the next move is a cut...as with all the other rate hikes since 2009 this one will have to be reversed."
"The Fed has seriously lost credibility. No one believes them."
prospects of UK rate cuts rise as world demand slows and cap goods orders in US collapse https://t.co/5IqDHbZwJM https://t.co/RaUKN7Bycy
— Danny Blanchflower (@D_Blanchflower) January 28, 2016
For Blanchflower, the Federal Reserve underestimated the negative spill-over effects from the slowdown in the economy of the People´s Republic of China.
My expectation now is that next move by the Fed will be to reverse the rate rise - clear that their move in December a major macro mistake
— Danny Blanchflower (@D_Blanchflower) January 27, 2016
The Dartmouth college economist reportedly referenced an article from Bloomberg´s Mark Gilbert revealing new figures on global trade pointing to a "steep" slowdown in global commerce.
Furthermore, Yellen&Co. had not yet caught on to the fact that falling oil prices were a signal of weak global demand and not a so-called positive 'supply-shock'.
For him, the Fed´s omission from its policy statement on 27 January that the balance of risks facing the economy was "balanced" constituted "a big admission of a mistake".
Economic indicators were now pointing to a recession.