Ed’s Daily Notes for March 20th   Leave a comment

Bloomberg: Yellen Retreat From Policy Thresholds Doubted as Yields Rise

What happened yesterday?

Janet Yellen said the Federal Reserve wasn’t altering policy when it overhauled the way it signals changes in borrowing costs. Investors didn’t buy it.

In her first press conference as Fed chair, Yellen emphasized that dropping a 6.5 percent unemployment threshold for considering an interest-rate increase “does not indicate any change in the committee’s policy intentions.”

Rather than paying heed to Yellen’s assertion, investors seized on an increase in Fed officials’ own interest-rate forecasts and Yellen’s comment that that borrowing costs could start rising “around six months” after it stops buying bonds. Yields on two-year Treasury notes climbed as much as 10 basis points, the most since June 2011.

The market reaction highlights the perils faced by central bankers when they retreat to language investors consider vague after setting precise numerical markers for changes in policy. Lacking specific guidance in the Fed’s policy statement, investors swung toward the next best thing: Fed officials’ own forecasts for the benchmark federal funds rate.

“With the shift to qualitative guidance, the only quantitative metric we have is the fed funds projections from the Fed,” said Dean Maki, chief U.S. economist for Barclays Plc in New York and formerly an economist at the central bank. “So while the statement and Chair Yellen in the press conference said little had changed, the Fed’s projections suggested that there was a notable change in the Fed’s outlook.”

In summary, the Fed is turning hawkish, and they tried to disguise this fact by being obscure in their statement. The markets saw right through it.

The Hill: O-Care premiums to skyrocket

Bad news for health insurers, as well as the American population:

Health industry officials say ObamaCare-related premiums will double in some parts of the country, countering claims recently made by the administration.

The expected rate hikes will be announced in the coming months amid an intense election year, when control of the Senate is up for grabs. The sticker shock would likely bolster the GOP’s prospects in November and hamper ObamaCare insurance enrollment efforts in 2015.

The industry complaints come less than a week after Health and Human Services (HHS) Secretary Kathleen Sebelius sought to downplay concerns about rising premiums in the healthcare sector. She told lawmakers rates would increase in 2015 but grow more slowly than in the past.
“The increases are far less significant than what they were prior to the Affordable Care Act,” the secretary said in testimony before the House Ways and Means Committee.

Her comment baffled insurance officials, who said it runs counter to the industry’s consensus about next year.

“It’s pretty shortsighted because I think everybody knows that the way the exchange has rolled out … is going to lead to higher costs,” said one senior insurance executive who requested anonymity.

The insurance official, who hails from a populous swing state, said his company expects to triple its rates next year on the ObamaCare exchange.

The hikes are expected to vary substantially by region, state and carrier.

Areas of the country with older, sicker or smaller populations are likely to be hit hardest, while others might not see substantial increases at all.

One of the inherent flaws in Obamacare was not allowing cross-state health insurance purchases. But let’s face it: They didn’t consult an actuary when they wrote the bill.

The Daily Caller: Rand Paul gets standing ovation at Berkeley: ‘Your right to privacy is under assault’

When was the last time a Republican got a standing ovation at Berkeley? Heck, few Republicans even bother to go there.

Delivering a rare speech for a Republican at this bastion of liberalism, Kentucky Sen. Rand Paul on Wednesday was given multiple standing ovations by the left-wing audience after railing against government surveillance and warning the students: “Your right to privacy is under assault.”

“I am here to tell you that if you own a cell phone, you’re under surveillance,” he told the crowd.

Paul’s address at the Berkeley Forum on the campus of the University of California at Berkeley focused on the National Security Agency’s collection of telephone metadata and the debate over privacy.

I won’t go so far as to call Paul the next Republican presidential nominee, but he is positioning himself from the rest of the crowd. Campaigning outside of traditional Republican bastions is an intriguing strategy. A lot can happen in the next 2 years, but Paul is one to watch.

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Posted March 20, 2014 by edmcgon in Economy, Federal Reserve, News, Politics

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