2015 Federal Reserve Interest Rate Increases
Today the Federal Reserve began to raise interest rates. We have been expecting this move for some time, and don’t expect a significant impact on our client portfolios in the near-term. We also don’t expect they will be in a hurry to raise rates further. Rather, we expect the Fed to sit tight for a few months to ensure there are no significant negative repercussions from today’s move, resulting in a gradual increase of their overnight lending rate to about 1 – 1.5% by the end of 2016. Today’s change resulted in some stock and bond market volatility, with intermediate (10-year Treasury) interest rates rising slightly as longer term bond investors took today’s changes in stride. Again, today’s development has telegraphed by the Central Bank for several weeks and was widely expected by investors. Stocks ultimately finished on a positive note for a pleasant change of pace.
Today’s move by the Fed was just the beginning of what we expect will be a multi-year process. They have also made it clear that should economic conditions deteriorate (lower growth or higher unemployment), then we could expect them to reverse course and lower rates back to the zero level.
Please feel free to contact us if you have any questions or concerns.