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Fed Holds Steady as Expected with Few Hints about March


Fed Holds Steady as Expected with Few Hints about March

As widely expected, the Fed decided not to raise interest rates on Wednesday at the end of its first scheduled FOMC meeting of the year.

The question that many had about this meeting is if the FOMC statement would have any hints to suggest that the Fed was backing away from its plan to gradually raise interest rates this year due to the recent market turmoil and global economic slowdown. For savers, the good news is that there is no clear signs that the Fed is backing away from the plan. Of course, the stock market wasn’t happy. According to CNN Money, "The Dow, which was up about 10 points before the release, dropped down 223 points points after the Fed's announcement."

The only significant mention by the Fed referencing the recent economic issues was in the first sentence of the statement:

Information received since the Federal Open Market Committee met in December suggests that labor market conditions improved further even as economic growth slowed late last year.

Even though the Fed mentioned a recent slowdown in the economy, it still highlighted continued improvement in the labor market. Later in the statement, it mentioned the recent low levels of inflation:

Inflation is expected to remain low in the near term, in part because of the further declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further.

Fortunately, the Fed continues to see the low inflation as "transitory". So that shouldn’t be a factor for the Fed to hold off on rate hikes. The Fed did mention in its statement that it’s "closely monitoring global economic and financial developments." If the market turmoil continues and the US economy shows signs that it may be heading into a recession, the Fed could easily decide to wait before announcing any new rate hikes. We’ll have to wait to its March meeting to know if that Fed is going to change its plans. Currently, the "unofficial" plan from the Fed is to have four 0.25% rate hikes this year (one at every other FOMC meeting).

Future FOMC Meetings

The next three FOMC meetings are scheduled for March 15-16, April 26-27 and June 14-15. The March and June meetings will include the summary of economic projections and a press conference by Fed Chair Yellen.

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Hoody (anonymous)   |     |   Comment #2
I seen this creepin up, its why I decided to go ahead and be over the Ins limit at Navy for a few months and opened that 30 mo 2.5 special CD. It looks like they'll drag their feet, while the banks continue to hold rates where they are. I'll see what it looks like by Nov when one comes due that's payin  (36mo) 1.24%
Anonymous   |     |   Comment #3
You got that right.  That 30 month 2.5% special was a good one to get.
Anonymous   |     |   Comment #4
I still admire the genius of that poster not otherwise qualified to join Navy FCU.  Getting wind of another CU Navy was set to acquire, he quickly secured membership in it, - and the merger being accomplished acquired member status in Navy as a result.

Wish he'd have posted his strategy for others to utilize also.
Anonymous   |     |   Comment #6
Marry a veteran, be a member, and then get a divorce!  Find a relative that is/was a member...then connect the "relative dot" equation...with $5 at a time
Anonymous   |     |   Comment #8
No not a genius.  Either inside information or a matter of luck. 
Anonymous   |     |   Comment #22
I didn't notice it before but #13 has the original article posted.
Anonymous   |     |   Comment #19
The merger was posted on this site that's how I found about it.... I check this site daily you never know what will pop up.
Anonymous   |     |   Comment #5
There is no reason for the interest rates to go up. With national debt of $20 trillions, all of them in short term t-bill, notes and treasuries invested  at 0%, it will destroy this nation overnight should the rates approach 3% at any one moment.
Anonymous   |     |   Comment #11
#5 Since the Fed hiked the Federal Funds rate in December Treasury yields have actually declined.

You seem to believe the Fed controls rates on Treasury debt instruments when in fact they do not, - the markets do.
Anonymous   |     |   Comment #7
Japan goes negative! Spend, baby spend.
Anonymous   |     |   Comment #9
Just read that this morning, too.  Never say never.  It can happen here.  We have been following in Japan's foot steps for the past several decades.  Almost as if "lucking into the future".  Our nation's financial situation is just as precarious.  Just that it's been whitewashed. 
Anonymous   |     |   Comment #10
I meant to write "looking into the future". 

Unfortunately there is not an edit feature to correct our own posts.
Anonymous   |     |   Comment #12
An act of desperation.
Anonymous   |     |   Comment #14
The Federal Reserve is clearly on a path of returning interest rates to a normal level of 3 percent to 3.5 percent over the next few years, a top Federal Reserve official said on Friday. Raising rates in December was the right thing to do, given the improvement in the labor market, San Francisco Federal Reserve Bank President John Williams said. Further and gradual rate increases "make sense" he said, although the exact timing of rate hikes will depend on the economic data.
Hoody (anonymous)   |     |   Comment #15
"although the exact timing of rate hikes will depend on the economic data."

This is what they've been sayin, and you can read between those lines, to me it just means more "caution" and more than likely slow.

 I'm looking forward to more rate hikes, even if I have CD's that go out 3 to 5 years, its good for those that are looking now, and good for something to look forward to, instead of looking at even lower rates as we have been now as our CD's come due.
Anonymous   |     |   Comment #20
Another drone reporting for the FED. And people keep glorifying this unelected bunch of bankers who get it wrong for the masses almost every time. They don't work for you and they never have.
Hoody (anonymous)   |     |   Comment #16
"Negative / Zero interest rate policies actually have created the opposite of their intended consequences.  People may be deceived temporarily into acting the way Central Bankers say they should; consumer more, spend your cash, spend your savings, invest in overvalued assets, etc.  But at the end of the day people realize they need to save for retirement because there may be not Social Security or retirement funds from their employer.  They have also come to realize that by saving and creating a nest egg or $1MM, there probably won't be any interest income of 10%, 7%, 5%, 2%, or 1%.  It used to be that interest rates reflected risk and safety in income was reflected along a curve of risk with the safest assets providing decent income, and the riskiest assets producing higher income, but less safety.  Now risk has been compressed to "zero," and savers / future retirees realize they will have to spend their principal as opposed to interest income in retirement.  The Central Banks have created a monster through manipulated "zero / negative" rates.  People will not consume or buy risky assets, they will hold whatever they have. Negative rates may actually create the run on the banks to remove savings and cash.  Consumption has been brought forward from the future to the "now," with the consumer the wiser."
Anonymous   |     |   Comment #17
Retirees have had to realize since 2008 that the playing field has changed!  One must save more than ever before since that is the fun(d) of the future and any, repeat, any interest is merely a "gift," so to speak, i.e. don't plan on "much" interest in any retirement plan!
Anonymous   |     |   Comment #18
People have purchased plenty of risky assets (i.e. stocks and real estate). Savers want FDIC guaranteed "investments" and, in this rate environment, the rates are what they are. When governments decide to eliminate even the possibility of a "bank run" all they have to do is enforce a fully digital-based economy. Imagine being told you have 30 days to turn in all your cash. As technologies mature the day will arrive when your local 16-year old snow shoveler will simply say, "job's done" as they hand you their phone for a quick money transfer from your account to theirs. No underground economy (except barter), no tax evasion and no bank runs. Central bankers will think they died and went to heaven.   
Anonymous   |     |   Comment #21
It has already started.  There are a few small municipalities my area that will not accept cash when paying your taxes or obtaining various building permits.