July 11, 2016
Even before the Brexit vote threw the global economy a big curve ball, at home our own Federal Reserve did a good job of keeping the sputtering going by voting again to not raise interest rates.
The terrible May 2016 jobs report showed that only 38,000 jobs were produced, versus an expected 162,000. Of course, that squashed any hope of the Fed raising the federal funds rate.
Perhaps what’s most surprising is that the board of governors voted unanimously to stay put. That’s after six of the 10 governors called for only one rate hike in 2016, instead of the once-predicted two increases. They decided the economy isn’t strong enough for multiple rate hikes this year.
The game of football continues. As a reminder – the scoreboard reads one rate hike of a quarter point in 2016 so far, despite several changes in strategy along the way.
And keep in mind, this all happened before Brexit. Federal Reserve Board Chair Janet Yellen said before the vote that it could have global consequences and determine the path for interest rate policy.
So what will happen now? The Fed’s positional flip-flops have already confused investors and instilled little confidence on policy direction.
All I can say at this point is “stay tuned.” We may be in for quite a ride.