Summary: Fed rate hikes, like eating Lay’s potato chips, are rarely done just once. Will the Fed raise rates tomorrow as expected and then what will be its plan going forward?
‘Fed Decision: It’s The Final Countdown (Video)‘
Today the Fed begins to deliberate about what will likely be the first interest rate hike in nine years!
And whether your business revolves around real estate, mortgages or manufacturing, you are an investor in stocks, bonds or commodities or perhaps you are shopping for a new house and will need financing, the decision announced tomorrow will potentially have a significant impact.
This impact will likely occur despite the fact that Janet Yellen and the FOMC would merely be moving fed funds .25% or 1/4 of 1%.
The reason is that this minuscule move many feel is overdue accompanied by the statement about the condition of the economy and then followed by a Yellen press conference will signal what future rate moves by the Fed may be.
And using Fed history as a guide along with the 1980’s era Lay’s potato chip advertising as another example, these moves are not typically one and done.
Further, while a hike may be overdue, a move-up in rates would be executed in the face of a still struggling U.S. economy, turmoil in emerging markets, angst in the high yield bond market and inflation that remains below the Fed target.
So will the Fed or won’t the Fed raise rates and, if they do, is it the right policy?
Market reaction post-decision will give us a clue but, the actual answer may not be known for some time.
In any event the one thing we do know? It’s the final countdown to the Fed!