Federal Reserve members previously suggested that there may be an increase in rates by as many as four times this year. Unfortunately the futures markets are still in disbelief. The Federal Open Market Committee finishes a two day meeting this afternoon and there is a statement scheduled to be made at two o’clock eastern; there will no be a press conference to follow, however.
“I think it’s going to be tricky in the sense I don’t think the Fed (officials) want to pigeon hole themselves into any one corner. On the other hand, they can’t be tone deaf to what’s going on. In September they talked about China and international developments as a reason to worry about financial conditions. If they gave us a statement that didn’t acknowledge it now, they would be tone deaf, but I don’t think they want to tip their hand as to what they’re going to do in March.”
-Peter Boockvar, Chief Market Analyst at Lindsey Group-
Many analysts including Chief Investment Strategist of JP Morgan, Philip Guarco, said that the Federal Reserve must take this opportunity to clear the air and fix this issue. “They have to make a reconciliation here because the market is saying one hike, and they’re still saying four hikes, so they really have to kind of close that gap,” he stated in an interview with CNBC earlier this morning.
The FOMC increased rates by 25 basis points in December; the first time in almost ten years. Today investors may be looking to trade on the Fed news as opposed to the actual markets. Economic data has not helped to support any further rate hikes either. Estimates on fourth quarter GDP growth remain under 1%. With levels like this, there really is not way that the Fed could raise rates in March. This sentiment was supported with the general consensus from the chief equity strategist at Federated Investors, “They’ve got to wait for some improvement in the data, which is going to push them out into September, June, you know, whenever the data begins to improve.”