75 Bips

Hot summer streets
The pavements are burning
I sit around
Trying to smile
But the air is so heavy and dry
--Bananarama

After signaling thru their WSJ mouthpiece that they were considering a 75 basis pt fed funds rate increase, the FOMC followed thru on Wed. The last time the Fed did 75 bips was 1994. 

This puts the fed fund rate target at 1.75-2%.

The infamous 'dot plot' showing forecasts by FOMC members of future fed fund rates find them firmly above 3% by year end.

The Fed's miserable record in forecasting anything accurately makes taking these dot plot projections seriously pretty laughable. 

As these page have noted, all previous rate hike cycles end when something breaks. This is because of the increased systemic leverage that results from the previous easing cycle--which never allows interest rates to return to previous cycle highs. A recession usually follows, along with more easy money from the Fed.

How high will rates go before triggering the next recession? A review of history suggests we may not be far from the peak. Perhaps this 75 bip move pushes things over the edge.

The 3%+ dot plot forecasts seem destined to be wrong (again).