Market Commentary

Interest Rates

interest rates

The FED met this week and decided not to increase interest rates. They control only one rate and that is the FED funds rate – the rate they charge banks to borrow money from the FED. The current rate is 1.5% to 1.75%. They also stated that they think inflation will meet their target of 2% in the coming months.

The more interesting part of their statement was that they maintain that rate hikes will be needed this year.

That means to most observers that at their June meeting they will make the move of another .25% increase. The FED officials are split as to the number of increases this year between three and four.

As rates rise the stock market will struggle because as rates rise it tends to slow down economies and in turn corporate profits. This is one reason you are not seeing a strong stock market despite huge increases in profits being reported for the first quarter.

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