Yahoo Finance Fidelity's take on life after quantitative easing (QE)
Despite speculation that the Federal Reserve will raise interest rates in June, minutes from the Fed’s April policy meeting released this week reveal a rate hike is highly unlikely. According to the minutes, the Fed’s committee expressed doubts that the economy will improve enough by June to warrant a rate hike.
Weak labor market improvement and a slew of disappointing data, including sluggish consumer and business spending, as well as an anemic 0.2% U.S. economic growth rate in the first quarter, all factored into the Fed’s resistance to raise rates.
“It’s not a surprise at all that June is off the table,“ says Jurrien Timmer, Director of Global Macro at Fidelity Investments. “The inflation component is really not a threat by any means, so the Fed can afford to wait.”
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Speculation is now turning towards a September or even December rate hike. The Fed has hasn’t raised rates in nearly a decade. “The collective wisdom of the markets, which is expressed in the Fed Funds Futures Curve, are telling us September or maybe even December,” says Timmer.
The Fed is unlikely to raise rates until it sees more improvement in the labor market and inflation rise towards its 2% target. The next indication of Fed intentions is expected on Friday when Janet Yellen is scheduled to give a highly-anticipated speech on the economic outlook.
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