The Fed meets with cross currents of strong data, but trade wars looming in the future.

The Fed meets this week with the meeting followed by the press conference with the Chairman. The Fed will also release its latest economic and inflation forecasts. The strong consensus calls for the second managed interest rate increase this year and the fifth consecutive increase since they began the process of normalizing monetary policy in December 2015. Investors will focus on the language in the announcement of rate action, the tone of the press conference and any changes in the forecasts. The effort will be to determine whether the Fed is going to raise rates two more times this year or just once. The guidance will come from a combination of all three sources of information. The Fed is meeting in the middle of a huge increase in the volatility of market interest rates and cross currents in economic fundamentals. The yield on the ten-year treasury has recovered much of the decline experienced two weeks ago and stands at 2.94% after reaching 3.11% at its peak and 2.78% at its low in the last month. The current economic data is consistently strong in the second quarter. Unemploymentis at near record low at 3.8%. There are more posted but unfilled job openings than the number of people looking for work, consumer and business fixed investments have accelerated from the slow beginning in the first two months of the year and the trade deficit has narrowed in the last two reporting months…

 

ProBank Austin Advisor-June 11, 2018