US Fed Interest Rate Policy Update

Three months ago, I had written about the US Fed's interest rate policy. (See articles dated March 22, March 27, and April 23.)

Here's an update.

Janet Yellen spoke last week at her quarterly press conference. She advised listeners not to spend time wondering whether the first rate hike will come in "September or December or March".  Instead she advised her audience to concentrate on the pace of the rise in rates and said that the pace would be "gradual".

Her words hint at the possibility that the first rate hike may not occur this year. Prior expectations were for this to occur in September. Prior to that, expectations were for this to occur in June (this very month).

The Fed Funds futures market -- used for hedging purposes -- is implying with virtual certainty that there won't be a rate rise in September. In contrast, at the beginning of this year the futures market was signaling with virtual certainty that there would be a rate rise by then.

The futures market is now signaling a 50-50 chance of a rate rise by the end of the year.

Expectations about the timing of first rate rise continue to get postponed.


Excerpted from a Financial Times article printed on 20 June/21 June, p. 16.


Afterthought:  Bond expert Jeff Gundlach, who is CEO and chief investment officer of Doubleline, doesn't think that the Fed will raise interest rates this year. He shared his mind on June 3. See article here.

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