A yellow warning light was illuminated today by BofA-Merrill after Fed Chair Janet Yellen's Senate testimony yesterday and the day before. She said it would be “unwise” to delay interest rate increases as the economy grows more strongly. The Thundering herd now thinks that the probability of a Federal Reserve interest rate hike next month has risen to 44%.
The stronger CPI which doubled to 0.6% in Jan. from 0.3% in Dec. and the nice 0.4% Jan. retail sales growth figure, both out today, further increased the odds on a Fed move to tighten. Year over year, the consumer price index rose 2.5%, hardly signalling a need for more stimulus, even though half of the rise was the direct or indirect result of higher gasoline prices. It's the other half which is worrying the Fed, particularly the fact that men's clothing costs rose by a record monthly amount.
US 10-yr Treasury notes are now yielding 6 basis points more than at the start of this week, luring in more foreign and US investors who also are adding to the upward trend of bond yields and the lower trend of both the dollar and bond prices.
The impact on stocks is the reverse. Costlier money and a lower Greenback tend to drive down share prices.
Inflation is coming to my business too. Paypal (now a stand-along company) will increase its transaction fees for online purchases from 3.9% to 4.4%. Moreover products sold across borders—including newsletters like my subscription one—will incur fees of 4.5% to 5% plus 30 cents.
All these new charges go into effect March 29. To avoid them, subscribers should renew early, before the notices go out. Our system is smart enough to tack your new subscription on to the end of your old one. And if you have been considering becoming a subscriber, do it now to save money.
Since we also pay come of our non-US based writes using paypal, to keep our contributors happy we have to also pay the higher fees for some of them. More about the problems of going global below fore paid subscribers along with news from Panama, Sweden, India, Chile, Argentina, Spain, Finland, Germany, Canada, Britain, Spain and Japan, including a reporting company.