Today’s release of the FOMC’s decision not to raise rates was really no big surprise. The release only contained minor changes to September’s statement. Market official expectations were around a 14% probability for a rate hike, while most participants pegged the figure closer to 0% considering the timing of the meeting in relation to the presidential election. The official tally was 8 members voted not to raise rates while 2 members voted in favor of raising rates. All eyes are now on December’s meeting with the markets predicting an almost 80% chance of a rate increase. Typically anything above a 50% chance warrants serious consideration for a rise.
source: http://www.zerohedge.com/news/2016-11-02/us-dollar-dumpsnpumps-december-rate-hike-odds-spike-80
As mentioned in prior Fed updates, the FOMC is falling well short of its own predictions of four rate hikes in 2016. Whether they actually follow through with one in December, their last chance to do so in 2016, will be telling about future policy considerations. Official comments included statements such as “decided to wait for further evidence” or stronger economic indicators and the “case for a rate hike has continued to strengthen”. While the FOMC continues to delay to await further evidence and strengthening economic factors, artificially low interest rates continue to hurt retirees, pension funds and life insurance companies. Without evidence that ultra-low interest rates help the economy all that much when not in crisis and ample eveidence that it greatly impacts retirees and the programs they depend on, why does the FOMC insist on deviating from its own plan? Maybe the negative global implications of a rate rise outweight the postive domestic ones. This idea of going global seems to have really caught on. Some perspective on interest rates, the December 2015 rate hike by the FOMC was the only rate increase in 11 years! And that rate hike was a quarter of a point one month shy of a year ago.
The continued uncertainty surrounding policy action continues to challenge the ability for companies and the markets to plan for the future. When participants complain about the lack of credibility from the FOMC, they are really just asking for some clarity and follow through to assist them in their decision making. Guess we will have to wait once again to see if the data aligns with the stars and policy normalization can thus commence.
At DeCesare Retirement Specialists we prioritize safety of capital above growth opportunity during volatile times. We continue to employ counter risk measures alongside a prudent growth strategy in order to protect capital in what continues to present as a challenging economic and investment environment.
Should you have any questions and/or concerns about your accounts with us or outside of our management, please call me at 856.235.3830 or email me at Steve@DeCesareRetirement.com.