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What to Expect from Fed's Rate Hike
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By Ryan Lange, CFA, _. Senior Investment Strategist, Great __ Bank Wealth Management
The Federal Reserve board _ an increase of the __ funds rate of 0.25%. _ is the third increase _ year and the eighth this rate hike cycle __ in December 2015. The federal funds rate moves to a target range __ 2.00% to 2.25%.
While the interest rate was expected, the financial __ are paying close attention __ the comments from the Jerome Powell to position upcoming rate hikes going __. The statement shows that most board members are another rate increase this _, likely coming in December. __ further ahead to 2019, average forecast from board __ is currently for three rate increases.
Keep in mind that Federal Reserve can only control short-term interest rates. _-_ rates are controlled by _ factors including future inflation __, supply/demand of bonds, international rates and the overall _ sentiment in financial markets. 10-year US Treasury rate moved sharply higher since September 2017, going from 2.02% to current levels around 3.10%. A key factor in _ move is higher inflation __ coming from the tax _ bill in December and federal spending bill that _ earlier this year. This _ stimulus will likely add of billions of dollars __ the economy over the years.
In addition to rate , the Federal Reserve also _ to decrease the size __ their balance sheet that built up during the quantitative easing programs in years following the financial _. After reaching a level __ approximately $4.5 trillion dollars, _ balance sheet reduction started __ September 2017 with $10 __ of US Treasury bond mortgage backed securities that _ allowed to mature without _ the proceeds. Starting next , the Federal Reserve will $60 billion of bonds _ off each month without __. While still a small _ relative to the remaining _ of the balance sheet, will continue to be __ demand for bonds that _ need to be made __ by other investors.
The Federal Reserve board _ to be data dependent will adapt the current _ as they monitor economic _. The next meeting will __ on November 7th and 8__ with current expectations that _ will leave the federal rate at current levels.
To reach a member __ the GWB Wealth Management _, please visit https://gwb-online.com/bnk/digital/index.html/wealth-management/find-a-wealth-advisor/ .
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