US Monetary Policy

Short Term Interest Rates
The classical cyclical economic case for raising short rates has weakened since latter 2014
with a more sluggish economy and awaits a return to stronger economic growth. Market rates
at the very short end of the curve are near record lows and support the Fed's ZIRP. With the
economy in its sixth year of recovery, capital slack in the system has been greatly reduced,
but there are presently no compelling imbalances in  resource utilization. The Fed has time
to watch for an improved economy before taking action.

Fed Generated Liquidity
The tapering and close out processes for QE 3 have adversely affected economic growth
and stock market progress in 2015. Since the Fed has not acknowledged these developments,
it is hard to say how aware policymakers are of the connection. I suspect it has been discussed
within the Fed and has made a few members of the FOMC more cautious about raising rates.

 The Fed has let over $35 bil. of assets run off Its books in recent months. This may have
bothered Treasury and stock market players some, and the Fed may allow some further modest
run - off. However, since seasonal system liquidity needs will firm up after the summer, it
may well be that the Fed will add back as much as $50 bil. to its book by this autumn. If so,
the markets may like that.