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Fed Rate Increase Today? Nah.

By: Grant Moon 01/28/15 12:25 pm

It’s near the end of the first month of 2015 and with it brings the first meetings of the FOMC. The Federal Open Market Committee winds up its two day meetings today and at the end of each session there are brief comments made to the press for distribution. Later, the actual minutes are released and will be scoured for some sort of “hidden” inference that investors love to discover. Last summer, most investors thought a rate increase was inevitable with only the timing in question. Yet recent economic data suggests that thinking was a bit premature.

VA mortgage rates are still near historic lows and unless things change dramatically it doesn’t look like the Fed can really do much of anything regarding interest rates. The quantitative easing program ended last October and what many had thought was an increase in the Fed Funds rate sometime in early 2015. Yet that appears to be completely off the table. At least that’s the general forecast.

When you look at other economies around the world there really aren’t that many safe havens to place any funds. Russia? The ruble has fallen so far so fast along with the price of oil their economy is in poor shape. Japan is in an official recession. Greek elections turned to the left and it appears austerity programs will be put on the back burner with an attempt to renegotiate debt. China’s economy is slowing down as well. And while Wall Street has been struggling over the past couple of weeks it’s still above 17000 and holding its own.

Yet what has kept interest rates so low for so long is partly due to a global move to safety. And there’s not too much around that is more secure than U.S. Treasuries and mortgage backed securities. The money that flows into those funds, the higher the price, hence the lower the rate. Any move right now by the Fed would be a real surprise. One that the Fed refuses to make.

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