The Federal Reserve can directly control short-term rates, but long-term rates are determined by expectations of future short-term rates. Since the global econ

The Federal Reserve can directly control short-term rates, but long-term rates are determined by expectations of future short-term rates. Since the global economy is still quite weak, raising rates now increases the probability of reduced economic growth, higher unemployment and future rate cuts. Prediction 1: If short-term rates increase tomorrow, then investors will anticipate this and drive long-term rates lower. Much of this is already priced in, as long-term rates fell today with 30-year treasurys yielding less than 3%. Prediction 2: Know-nothing analysts on cable news will be shocked to see long-term rates fall when short-term rates rise.