Today marks the end of a two-day meeting of the Federal Reserve Members. Janet Yellen will also be interviewed after the release of minutes, along with updates of members estimates of short-term/Fed Funds Rates.
Higher Rates Sooner
The term “Considerable time” of lower rates (currently at zero, think of what your checking account is earning) has been in the Federal Open Market Committee (FOMC’s) minutes for several years now. If this terminology is removed, which we expect, the clear signal is for higher rates some time next year.
In completing the coming Newsletter, we have recently researched the average short-term Fed Funds Rate (again, think of what your checking account earns.) We were very surprised, considering it seems like we have been at zero for a LONG time. The average over the last 725 months is 5.1% … yep that is correct.
Dot Chart Update
The FOMC members also release their estimates on where rates will be over the next several years. Ignoring the longer term, next year’s estimates will garner the most attention from us.
Here are the estimates from the September 2014 FOMC release and estimates.
As of the September estimates, one can infer a 90% united agreement by FOMC members that rates will be somewhere between 1-2% in 2015. Today we will learn if the new estimates are higher, lower or the same ! Our bet, higher.
Have a Great Day!
John Kvale CFA, CFP