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In Q4 2023, the FOMC (Federal Open Market Committee) led by Jerome Powell surprised all by suddenly announcing the end of interest rate increases and suggested rate DECREASES may be on the horizon…. We wrote about this extensively and were also part of the surprised….
Fast forward to today and using Jerome Powell’s own inflation/CPI target of 2% as the goal…. inflation measurements are not cooperating… pushing out rate decrease time lines… With a FOMC meeting tomorrow and announcement on Wednesday (including Fed Dot plot projections) of this week (3-19 to 3-20 2024) we should not have to wait long to find out.
Observations:
- Higher interest rates for longer would give safe savers, bond investors and other fixed type of assets continued traction (nice returns)
- The reason rates are stuck higher for now is the Economy is just NOT slowing – Nice problem to have
- A Fear factor is all of the sudden rates do grab and a fast economic slow down occurs…
Here’s the proof:
That’s 3% way over on the right, still a ways from 2%!
And here is the 2 year and 10 year Treasuries (Yep still inverted – convo for another time)
Here is the rub…. if the FOMC ignores their prior targets and lowers rates BOFORE hitting lower inflation prints, longer term rates may actually go HIGHER in anticipation of higher inflation!
Have a Great “Stubborn Inflation/Rates” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
