As indicated by the Fed Funds futures contracts, the Federal Reserve (Fed) held steady with interest rates at its September meeting. The markets priced in less than a 25 percent chance of an interest rate increase and the FOMC did not disappoint.
Although Janet Yellen, along with other Fed voters, have insinuated in the past month that we are on track for at least one rate hike in 2016, they chose to remain with the wait-and-see method. Lackluster economic numbers along with geopolitical events around the world have given the Fed the ability to analyze more data in the upcoming months to assess their next move. However, by not raising rates at the September meeting, the Fed may have backed itself into a corner to raise rates in November or December in order to maintain credibility.
We have built at least two interest rate increases into our portfolio plans for 2016, so the fact that we may only have one is a positive. We will continue to monitor economic data leading into 2017 to gauge when the Fed might react in the year ahead and make sure our clients are prepared.