The Federal Reserve has raised interest rates for the first time in a while – although it seems that the rest of the world is shrugging their shoulders at the news.

Probably because:

  1. The Fed said that they would one day definitely do this.
  2. Then the Fed said that they were planning to do it soon.
  3. Then they said sooner then soon, actually – they’re thinking end of this year, beginning of next.
  4. They also told us what they would want to see in the indicators to do it this year.
  5. Then they said that they had seen what they wanted to see in the indicators.
  6. Then there were multiple appearances and FOMC minutes that showed that they were almost certainly going to do it in December.
  7. Then they basically said that they were going to do it in December.
  8. Then Janet Yellen came in front of Congress and more or less confirmed December.
  9. And then they announced it.

This was not a surprise. This was like the outcome of a pregnancy that was due to end with a planned Caesarian. There were few prizes for predicting that the rate hike baby would arrive when it did.

Some Fed Guidance from September 2014
Some Fed Guidance from September 2014



Even so, the Efficient Market Hypothesis folks seem to be doing some crowing about how efficient the market is for taking the rate hike and pricing it into assets.

Only, I’m not sure that you can call the market “efficient” for pricing in an event that everyone (and I mean, everyone) has been concerned about since QE began – and an event that everyone knew was coming because of all the forward guidance (except for those three contrarians in the Bloomberg survey of 105 economists, who thought that there might not be a hike).

But perhaps that’s just me.

Also, some perspective:


Rolling Alpha posts about finance, economics, and sometimes stuff that is only quite loosely related. Follow me on Twitter @RollingAlpha, or like my page on Facebook at Or both.