All Posts Tagged: interest rates

U.S. Outlook: The Fed thinks twice about raising rates again

Scott Anderson
Chief Economist

Chairman Jerome Powell and the FOMC rapidly shied away from further rate hikes at this week’s FOMC meeting. Spooked by slowing U.S. inflation, Close up of the Federal Reserve building with the eagle statue slowing growth in Europe and China, and bond market signals of more trouble ahead, the Fed retreated further from their rate hike guidance for 2019.

Powell signaled a prolonged pause in further rate hikes and opened the door that the next rate move from the Fed could, in fact, be a rate cut. The FOMC continued to describe current economic conditions as solid and their baseline forecast remains that the U.S. expansion will continue, but the cross-currents of slowing inflation and downside risks to global growth were enough to weaken the case for further rate hikes.

For more on this, see highlights of my report below, followed by a link to the full U.S. Outlook, delivered on Feb. 1.

Key observations:
  • The Fed estimates that the Fed funds rate is already at the lower-end of estimates of the neutral rate, suggesting that further rate hikes could lead to unfavorably slower growth and an unwelcome period of disinflation.
  • Despite robust job growth of 304,000 in January, real consumer inflation pressures appear a long way off. There has been widespread declines in global commodity prices over the past year.
  • Given the FOMC’s rapid change of heart and our own forecast that core-PCE inflation will not return to the FOMC’s 2.0% target until the fourth quarter of 2019, we think the Fed is on hold now until the December FOMC meeting, where we are forecasting one final quarter-point rate hike.

Read my full report.

Read More ›

Instant Analysis: December FOMC Minutes

Scott Anderson
Chief Economist
A wide-angle photo of the Federal Reserve.

Despite the quarter point Fed funds rate hike that occurred at the end of the December FOMC Meeting, the minutes of that meeting reveal the dovish tilt that was already beginning to influence the FOMC’s view of the likely extent and timing of further interest rate hikes.

Read More ›

U.S. Outlook: Dissecting the dots

Scott Anderson
Chief Economist
View of a eagle statue on Federal Reserve building in DC

Just looking at the Fed’s median forecast gives one a false sense of precision about the future of U.S. interest rates.

Read More ›

Investment Insights: Should we fear, fear?

Wade Balliet
Posted by Wade Balliet
Investment Strategy
Upward view of NYSE, decorated with wreaths and a Christmas tree at left.

We believe that the volatility of late has been a long overdue reaction to risks that have been present but are just now being fully priced into financial markets.

Read More ›

Instant Analysis: FOMC Decision for December

Scott Anderson
Chief Economist
Winter shot of Federal Reserve building through leafless trees.

The outcome of the December FOMC meeting was what we have been forecasting.

Read More ›