NEW YORK (TheStreet) -- The Federal Reserve could send markets reeling tomorrow if it removed assurances that near-zero rates will continue for "a considerable time." Such a move would immediately spark speculation that the central bank could hike rates as soon as March, much earlier than previous forecasts.
With few short-term pressures on inflation and with the risk higher rates pose to high-performing sectors like autos and to weaker sectors like housing, there's little reason for the Fed to rush. And there are millions of reasons to wait.
We've already seen the damage it can do. Last year, an offhand remark by then-Fed chair Ben Bernanke suggesting that ever-so-slightly tighter money was coming moved trillions of dollars of assets, raised mortgage rates by a full percentage point and nearly aborted the housing recovery. That could happen again if the Fed moves too soon.
TheStreet asked Moody's Analytics to forecast the impact of a 100-basis-point increase in 10-year Treasury rates, which is less than the spike that followed May 2013. The results: The gain would trim car and truck sales by an annual rate of almost 1 million by late 2015, hurting companies like Ford (F) and GM (GM) . It would shave about 1.5 percentage points off the likely annual gain in housing prices. It would reduce housing starts by builders including D.R. Horton (DHI) and Pulte (PHM) by an annual rate of about 70,000. And it would raise the unemployment rate by about 0.1 percentage point.