What The Fed Said – September 27, 2016

After much speculation on both sides, the Federal Reserve Board’s Open Market Committee met last week and made their decision regarding interest rates. The markets experienced significant volatility leading up to the meeting as stocks pulled back, interest rates rose and oil prices fell. With the volatility, none of these moves came in a straight line, especially with regard to the stock market.

As we have previously noted, the markets often start bouncing back from their pre-meeting movements as the event gets closer. This time the markets stabilized somewhat before the meeting and, immediately after the meeting, we saw a moderate rally in stocks and a moderate drop in long-term rates. Why the subdued reaction? Even though the Fed declined to raise rates, there were three votes in dissention. The markets initially interpreted these votes as an indication that the Fed is moving closer to raising rates, most likely at their December meeting.

On the other hand, according to the New York Times — Chairwoman Janet Yellen, said she saw no reason to rush. “The economy keeps bubbling along without boiling over. We are generally pleased with how the economy is doing,” she said at the news conference after the meeting. “The economy has a little more room to run than might have previously been thought. That’s good news.” Thus, while the economy is growing moderately without exacerbating inflation, there are some who think the Fed is waiting too long to make a move, including some members of the organization.

Source: Origination Pro

September 27, 2016