Friends
The Fed, as expected left interest rates unchanged, but it wasn’t all quiet with regards to the FOMC statement and Chair Yellen’s subsequent press conference. Though they did not raise rates this time the Fed did indicate that there is a likelihood that they will raise rates one more time this year (likely December), and that they expect to raise rates 3 times next year. Also, the reduction of their $4.5 trillion balance will begin in October. At first the amounts will be somewhat minimal -$6 Billion of Treasuries and $4 Billion of mortgage-backed securities each month. After that, should all of their forecast remain intact, the Fed would accelerate those purchases. The market wavered a little after the statement was released, but by the close there wasn’t much to talk about.
For the day, the Dow Jones Industrial Average was up 41 points to finish the day at 22,412. The S&P 500 was up 1 point to close at 2,508. Gold was down $6 to trade at $1,304 per ounce, while oil was up $.93 to trade at $50.29 per barrel WTI.
Interestingly, if the Fed Funds rate is 2% -2.25% by late next year, it would seem very unlikely that the 10 year Treasury note will be sitting near 2.25% as it does today. Something has to give- either the 10 year note has to sell off or the Fed won’t be getting anywhere near 2% on the Fed Funds rate. If the 10 year is still near 2 % a year from now then that would likely mean that the economy is not booming . If the economy is struggling then the Fed would be crazy to be raising rates.
Have a nice evening everyone.
Stay Strong Houston
