When the skies are blue and the mercury tops 90, many of us turn to America's pastime, baseball, to distract us from our daily travails. But in recent years, America has developed a new pastime, watching and predicting what the Fed will do with interest rates. At the end of July, the Federal Open Market Committee (FOMC) meeting provided a couple of innings of data on what might be happening down the stretch of 2016.
In their press release from July 27, the FOMC indicated that "near-term risks to the economic outlook have diminished." Watchers believe that this indicates the FOMC will consider raising federal funds rate at their next meeting in September for the first time since December of last year. Of course, the FOMC also indicated that "inflation is expected to remain low in the near term," which may indicate that the jury is still out on interest rates since low inflation will decrease the FOMC's sense of urgency, but a rise in energy prices would quickly erase that margin of error.
What should clients be doing in the face of a potential rise in September? The first thing is to understand that the time to begin acting is now. The markets are already anticipating a rise in rates and pricing it into various products and services. Increasing rates will affect everything from mortgages and commercial leases to working capital costs and labor wages. The economy - now in its seventh year of expansion - will react to rising rates.
You're Invited! Not-For-Profit CFOShare
Tuesday December 10, 2019
4:00 PM - 6:00 PM
You're Invited! Annual Accounting & Business Conference
Wednesday December 4 2019
Hosted at the MSU Management Education Center in Troy, MI
You're Invited! Construction Update
Thursday November 21, 2019
Detriot Athletic Club
241 Madison Avenue
Detriot, MI 48226