Success in banking is about so much more than financial statements and balance sheets. It is also about confidence and respect that those that are overseeing these financial institutions and their associated markets have the wisdom and discipline to do what is both right and necessary, even if the act of doing so can be both surprising and uncomfortable at times. Unfortunately for the U.S. Federal Reserve, in their undying efforts to be as accommodating and supportive as humanly possible, they have effectively lost the confidence and respect of the financial institutions and markets that they have been assigned to oversee. Such loss of confidence is deeply problematic, as it undermines the potential efficacy of their future actions when they may be needed most. As a result, it is imperative for the health of the financial system that the Fed reclaims respect as soon as possible. And moving to act with a 25 basis point interest rate hike at their next meeting in September would be the best and most direct route in doing so.
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