As more and more evidence of the liquidity bubble becomes apparent...the FED will be given "permission" to raise rates in August...and probably for the rest of this year.
Unless of course Bernanke gets the courage to go 50 BP all at once...and quit coddling the speculators on Wall Street. But the chances of that happening are almost nil.
My hunch is that the hyper-liquidity will not be fully "drained" until FED funds goes to 6.5 or 7 percent... Simply put to get the hyper-liquidity out of the system requires an "over-shoot" because so much money is "tied up" in asset prices that simply MUST stop being funded by the FED...
This means a decline in stock prices and real estate prices is essential...because much of the "liquidity" is FICTIONAL...existing only in mere expectations of price levels that are no longer being funded with "easy money!!"
If the markets were to decline on their own...without the rate hikes behind them...then Bernanke COULD quit raising rates "early" and allow the economy to resume under "normalized" monetary policy... But as long as asset prices stay high...the FED's job will not be done...
