The Federal Reserve is still deciding whether or not to raise interest rates. With the slow economic growth and stagnant inflation rate, the Fed is not very concerned with raising the short-term rates higher. Janet Yellen had previously stated she thought the Fed had a strong case for raising rates partly due to the price of the 10-year Treasury note price dropping. Many doubt that central banks can and would stimulate the economic growth. This doubt led the prices of bonds, along with many stocks, to significantly decrease. Recently, the European Central Bank decided to leave their interest rates unchanged despite hopes for an increase. The Fed is looking to Europe and Japan for any clues about which path to take regarding the rates. These two areas are in similar situations, but with negative interest rates and bonds being purchased to keep them down. The European Central Bank recently decided not to expand their bond-buying program and Japan is also meeting soon to determine if they should change their efforts. By the end of the month the Fed will have made their decision, a much anticipated one by the public.
http://www.wsj.com/articles/rate-rise-fears-trip-up-markets-1473462332
It is pretty interesting to watch all the different pieces move in conjunction.
ReplyDeleteBoston Fed President Eric Rosengren has been one of the more dovish (more cautious of raising rates) members of the FOMC. According to market watch:
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"[He] said Friday he backed gradual interest rate hikes, saying that waiting too long risks some asset markets like commercial real estate 'become too ebullient.'
Fed officials have refrained all year from describing the risks to the outlook as balanced in their policy statements. The last time that the statement said risks were balanced was last December when the central bank hiked interest rates by a quarter percentage point.
Rosengren said the economy has been “relatively resistant to shocks from abroad of late.” And he said that concern with fragile global economies “does not seem to be strongly prices into financial assets, at least to date.”"
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It seems that the FED is beginning to focus less on global affairs, as the U.S. growth picks up. It will be interesting to see which FOMC members vote to stand pat and which vote to push rates up on September 21st.
http://www.marketwatch.com/story/feds-rosengren-backs-interest-rate-hike-2016-09-09
Great point, Billy. The underlying importance of the FED's focus on the US economy vs. the global affairs aspect within their power.
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