Good News For Rates

Dated: 06/17/2016

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The June 15 press release from the Federal Reserve is good news for rates for the short term; good news that interest rates did not trend up this summer as some economic prognosticators predicted.  

The employment figures/weak domestic growth that we addressed in previous emails, which were painted bright however didn’t translate into the new job growth expected, kept the fed from being able to raise rates. 

The fed would love to raise the rates as doing so would mean the US has shown economic recovery.  The fact that they cannot is due to that the US economy is still on fragile ground.  Keeping the rates down also keeps the US dollar from rising.  The good in that is it’s bullish for big businesses as it keeps foreign sales from getting hurt by a rising dollar. 

All in all what this means is everyone had predicted the feds would raise rates twice this year, yet the last rise was last December 2015…..we haven’t had one this year. 

Therefore the new prediction is we will have just one rate increase in 2016 instead of 2.  But when?  In late July when the central Banks meet?  When farm payrolls come off in late September? Inflation stays below the 2% fed target.  Economic growth disappointed at .8 so far…..Wages are still at pre-recession levels and at 2.5% for the last 12 months.  So when is that one rate increase coming?   Stay tuned I guess.

Yellen is still talking, however is very good at not making outward statements.  Bonds reacted favorably with a quick uptick on the news. 

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