2016_09_21 — “Fed on Track to Hike Rates in December” — Perspectives, The Here and Now

September 21, 2016

Fed on Track to Hike Rates in December

The U.S. Federal Reserve (The Fed) appears firmly on track for a December hike after leaving the federal funds rate unchanged today at ¼ to ½ percent.

Today’s Federal Reserve’s Open Market Committee (FOMC) meeting was divisive:

• Rates were left unchanged
• As many as three of the current ten voting members dissented, preferring an immediate rate hike with previous hawk Esther George joined by Loretta Mester and Eric Rosengren
• 14 of 17 Fed officials still expect at least one rate hike this year, presumably in December when the next FOMC meeting followed by a press conference is scheduled
• — — — To eliminate ambiguity over a raise by year end, the Fed’s statement noted that the Fed “judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives”
• — — — In addition, the near-terms risks to the economic outlook were described as “roughly balanced” whereas the previous statement only acknowledged that those risks had “diminished”

We are eight years into an economic expansion at sub 2% gross domestic product (GDP) growth and — precisely because overheating and excessive exuberance have been missing — economic expansion has further to go. Central bank governors as well as administrative policy makers mostly understand what they must do to assure this. Central banks still seem to offer an accommodative safety put to the market with gentle tapering and federal administrative officials finally seem willing to increase fiscal spending.

The Fed’s patient signaling seems to be healthy for investments. Additional Fed hikes will be few and far between. The lack of both growth and inflation volatility continues to nudge investors to stretch for yield and take risk.

Michael Ashley Schulman, CFA
Partner, Managing Director

Disclosure: The views and opinions expressed are those of Michael Ashley Schulman, CFA and are subject to change without notice. The views and opinions referenced are as of the date of initial publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Forward-looking statements cannot be guaranteed; neither can backward-looking nor current-looking statements. This material is provided for informational purposes only and does not constitute an offer or solicitation to purchase or sell any security or commodity or invest in any specific strategy. It is not intended as investment advice and does not take into account each person’s or investor’s unique circumstances. Information has been obtained from sources believed to be reliable, but its accuracy, completeness and interpretation cannot be guaranteed. Past performance is no guarantee of future results.

Originally published at https://www.hollencrest.com and at https://seekingalpha.com.