This Week's Forecasts & Trends E-Letter
Fed Eager To Raise Rates In June, But Is It Serious This Time?
May 24, 2016
On Wednesday of last week, the Fed released the minutes from the most recent policy committee meeting on April 26-27. The official policy statement at the conclusion of the meeting suggested that the Fed was in no hurry to raise the Fed Funds rate anytime soon. Yet the actual minutes made public last week tell a very different story.
In fact, a majority of the policy committee members agreed in late April that the next rate hike should happen at the upcoming June 14-15 meeting, unless there is some unexpected negative surprise in the economy. This same majority believed that the US economy was strong enough to warrant a June hike in the Fed Funds rate and maybe more later this year.
Even before the meeting minutes were released last Wednesday, several top Fed officials went on the record saying not only that rates should rise at the June policy meeting, but there could well be another rate hike or two this year beyond that. As you might expect, this news hit equity markets very hard last week. Here we go again! Details to follow below.
Following that discussion, I will offer some thoughts about the upcoming vote on June 23 to decide whether Great Britain will remain a member of the European Union or will abandon it. If the UK decides to withdraw from the EU – the so-called “BREXIT” – it could roil equity and bond markets around the world.
Between the Fed decision on June 15 and the UK decision on June 23, we could see some wild market gyrations in the weeks ahead, and the outcome could potentially be very ugly.