FOMC Meeting – September 17, 2015

The FOMC recently released its latest monetary policy statement.  This was a much-anticipated meeting because there was no consensus on what the Fed was going to do.

It turns out that the Fed will not raise its key interest rate this time around.  Apparently 7 years of near zero interest rates is not enough stimulus for the economy (in the eyes of the Fed).

You can read my expanded thoughts on this here.  I bring up the possibility that we may see the Fed eventually raise its key rate while also turning back on its digital printing press, something I have already mentioned here before.

The Fed is in a bind.  Stocks are really shaky and a possible economic downturn is looming.  The Fed has already tightened its monetary policy when it ended QE last year.  It is afraid to go a step further and attempt to raise interest rates.  But by not raising rates, it is also signaling that it does not trust the so-called recovery.

And if the Fed does “raise rates”, it may actually lower rates.  It can raise its key rate by paying a higher rate on bank reserves, but market interest rates may fall if there is a major economic downturn.

Leave a Reply

Your email address will not be published. Required fields are marked *