Economy

What The Experts Are Saying About The Fed Hike

CNBC.com
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The Federal Reserve's move to hike the discount rate Thursday struck fear into many on Wall Street as speculation stirred that the increase signaled the beginning to the end of an era of abnormally low rates.

Experts weighed in on the Fed's decision Friday and shared with CNBC what they believe the Central Bank's next move will be.

Fed Shows Faith in Recovery

"Technically, the discount rate move doesn't mean all that much, but no matter how you slice it, it tells you the Fed has a lot of faith in the durability of this recovery.This recovery, as the Fed is implying, is for real, there is no double dip and it's going to sustain."

-Lakshman Achuthan, Managing Director Economic Cycle Research Institute

This Move Was Obvious

"It was pretty obvious to us that it was going to occur soon and that it had nothing to do with the timing of the ultimate exit from the extraordinary low monetary policy accommodation. The next move will be to actively withdraw reserves, that will come late. That will come a meeting or two before the Fed actually hikes the funds rate...And we don't think the Fed will actually raise the funds rate until into 2011."

-Lawrence Meyer, Vice Chairman of Macroeconomic Advisers/ former Federal Reserve Governor

The Process Is Underway

"I think this was not a signal as far as timing goes, but I think it was a signal as far as the process goes. The process is underway, the Fed is removing the liquidity support facilities that have been in place and will eventually get to the point where they start to do more. Our view is that the market is going to push the Fed into action, what the fed says is important, but at some point it's going to be the market driving the ship...At some point in the second half of the year, the market will be pushing the Fed further."

-David Greenlaw, Chief U.S. Fixed Income Economist for Morgan Stanley

A 'Perplexing' Move

"I don't think the Fed would raise rates until the unemployment rate is definitively moving lower and I don't see that until the end of the year. I think this is more of a technical move, I think though it is a bit perplexing that they moved as quickly as they did... The meaning of it is insignificant, it's not going to change anything, but the fact that they moved this early is a bit perplexing."

-Mark Zandi, Chief Economist of Moody's Economy.com

The New Normal

"You have to be from Mars not to know he (Bernanke) had to do the discount rate, but the federal funds rate, what Bernanke is also saying, is not going to be as good as it was historically measured by what's going on in short term monetary markets."

-Mario Gabelli, CIO of Gamco Investors