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Market Recap: No Rate Hike Following FOMC Meeting

Posted On September 23, 2016

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The market has stayed consistent this week following the Federal Open Market Committee (FOMC) decision to not raise rates.  Mortgage rates are closing out at 3.47% or about the same rate as they started.  Economists remain conflicted about some of Janet Yellen’s comments, though general consensus is that the economy has exhibited modest growth, but there is still room for improvement.

Job Market Improves. Jobless claims have fallen to the lowest level since July, a metric only slightly above a four-decade low reported in April.  These levels indicate an uptick in hiring and job creation, though the pace has slowed since 2014 and 2015.

No Rate Hike … Yet. In her post-FOMC statement, Janet Yellen admitted that the case for higher interest rates had strengthened, but the committee decided against a rate hike because the economy has more room to grow.  Still, according to the CME’s FedWatch tool suggests there will be a 51.9% chance of a December rate hike.

Report: Low Numbers. The Chicago Fed National Index fell to -0.55.  This data reinforces concerns that the economy weakened in August, due to slowed production.

Based on this week’s FOMC decision we can gleam that inflation is low.  Thus, the course of action is to keep rates low as long as there is some room for growth in the job market.  Yellen justified the decision by suggesting, “we don’t see the economy is overheating now.”  The Fed needs to stay ahead of the curve, because waiting for the economy to overheat could allow inflation to get a foothold and be harder to rein in.

Sources: Wall Street Journal, Economic Calendar, Market WatchMarket Watch