Clarksville, TN – The Federal Open Market Committee delayed the start of policy normalization, citing concerns about global economic and financial developments.
The FOMC is not reacting to overseas developments per se, but rather to the implications for the U.S. economy (some restraint on growth, further downward pressure on inflation). In the revised dot plot, there was little agreement about where the federal funds rate would be at the end of 2016 and 2017.All but four of the senior Fed officials still expect to begin raising short-term interest rates by the end of this year (one official actually wanted to move to negative rates).
The Fed did discuss raising rates. However, in her post-FOMC press briefing, Fed Chair Janet Yellen said that heightened uncertainties abroad and a lower expected path for inflation left officials wanting to see more evidence.
The economic data were mixed. Retail sales were restrained by lower gasoline prices and a pullback in building materials, but core sales continued to improve at a moderately strong pace. Industrial production fell last month, partly reflecting the unwinding of a seasonal quirk in autos. Lower energy prices pushed the Consumer Price Index down 0.1% (+0.2% y/y). Residential construction figures were mixed (housing starts fell, but the more accurate building permit figures improved).
Next week, the economic data are second-tier. While there could be market reactions to any surprises, none of the reports is going to alter the bigger economic picture. Fed Chair Yellen will speak on Thursday after the market’s close. Investors should pay attention to what’s going on in Washington, as a possible government shutdown looms.
Congress must come up with funding beyond September 30th (the end of the fiscal year). Tea Party Republicans are threatening to withhold funding for Planned Parenthood. In addition, Congress needs to raise the federal debt ceiling by early December.
|Last||Last Week||YTD return %|
Consumer Money Rates
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.559||1.628|
|Dollars per Euro||1.144||1.287|
|Japanese Yen per Dollar||120.010||108.370|
|Canadian Dollars per Dollar||1.318||1.100|
|Mexican Peso per Dollar||16.600||13.245|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||3.56||3.50|
Treasury Yield Curve – 09/18/2015
As of close of business 9/17/2015
|Sept 21st||—||Existing Home Sales (August)|
|Sept 24th||—||Jobless Claims (week ending September 19th)
Durable Goods Orders (August) New Home Sales (August) Yellen Speaks (“Inflation Dynamics”)
|Sept 25th||—||Real GDP (2Q15, 3rd estimate)|
|Sept 29th||—||Consumer Confidence (September)|
|Oct 1st||—||The federal fiscal year begins ISM Manufacturing Index (September)|
|Oct 2nd||—||Employment Report (September)|
|Oct 12th||—||Columbus Day (bond market closed)|
|Oct 28th||—||FOMC Policy Decision (no Yellen press conference)|
|Dec 16th||—||FOMC Policy Decision, Yellen Press Conference|
US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the US government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.
Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business September 17th, 2015.