It appears that, after reviewing the latest comments from the Fed, the majority of prognosticators continue to believe that the Fed is likely to modestly increase interest rates at the September meeting. Apparently these expectations come despite some real questions as to whether economic conditions actually warrant higher interest rates. Consider:
- Inflation appears to be running well below the Fed’s target rate of 2%.
- While unemployment data remains well below historical Fed targets, labor force participation remains at record lows and there has been virtually no improvement in wages.
- Increasing interest rates is likely to further strengthen the dollar. A strong dollar has a negative impact on multinationals’ earnings.
Would the Fed increase interest rates just because it’s about time, despite a dearth of supportive economic data?
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA®
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