August 25 2016
Last week, Wall Street was speculating about monetary policy with the enthusiasm of commentators trying to predict who will bring home Olympic gold.
The Federal Open Market Committee (FOMC) is expected to introduce another rate hike before the end of 2016, according to the BBC, and it has just three opportunities to deliver the goods – during its September, November, or December meetings.
Analysts and pundits parsed minutes from July’s FOMC meeting looking for clues about timing and found relatively few because there was no consensus view at the July meeting.
The BBC wrote, “According to the minutes, some FOMC members felt ‘economic conditions would soon warrant taking another step,’ while others believed more data was needed.”
The BBC also pointed out a hike in November was unlikely because of the timing relative to the U.S. Presidential election.
The sooner-is-better camp inside the Fed has been quite vocal recently. CNBC reported New York Fed President William Dudley, Atlanta Fed President Dennis Lockhart, and San Francisco Fed President John Williams each made statements confirming solid economic growth is expected during the second half of 2016, and indicating it’s time to continue increasing interest rates in the United States.
Recently, the CME Fed Watch tool (which looks at 30-Day Fed Fund futures prices to gauge the likelihood of changes in Fed policy) put the probability of one-quarter to one-half percentage point rate increase during September at 88 percent.
That may change this week after Fed Chair Janet Yellen speaks at the Fed’s summer retreat in Jackson Hole, Wyoming. She’s expected to provide some indication of whether the Fed is ready to take action.
If you would like more information, just ‘friend’ the Fed. It now has a Facebook page.
- Data as of 8/19/161-WeekY-T-D1-Year3-Year5-Year10-Year
- Standard & Poor’s 500 (Domestic Stocks)00.0690.050.0990.1420.053
- Dow Jones Global ex-U.S.-0.43.8-1.5-0.32.50
- 10-year Treasury Note (Yield Only)1.6NA126.96.36.199.8
- Gold (per ounce)-0.426.819.6-0.5-6.18
- Bloomberg Commodity Index2.69.8-2.6-12.8-11.5-6.7
- DJ Equity All REIT Total Return Index-1.913.615.816.315.46.9
*Indices are unmanaged and investors cannot invest directly in an index.
*Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association
*S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
*Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.