2020 and Interest Rates – January 2, 2020
A year ago, the fed funds rate stood at 2.25-2.50%, and the Fed’s own projections suggested two 0.25 percentage-point rate hikes during 2019.
Instead, the Fed went on hold in January. The pivot was complete in June when the Fed hinted rates would likely decline.
- As we enter 2020, the fed funds rate is at 1.50-1.75%, and the Fed says it’s on hold.
Coupled with an easing of trade tensions, the Fed’s about-face on interest rates played a big role in 2019’s stock market rally.
A 2020 rate hike? Not so fast.
With inflation running below the Fed’s target, Fed Chief Powell said he would like to see “a significant move-up in inflation that’s also persistent before raising rates to address inflation concerns.”
- In other words, a growth spurt unaccompanied by higher inflation might not be enough to trigger a shift at the Fed.
Investor’s corner
Interest rates play a significant role. But so does economic growth. Stocks performed admirably between late 2015 and September 2018, as eight rate increases by the Fed failed to dent bullish momentum. Among other factors, thank an expanding economy.
For the most part, conditions that typically lead to a recession aren’t in place today. Ultimately, your financial plan plays a significant role in long-term returns. If you are satisfied with your plan, we congratulate you.
If you are looking for help setting up a plan, let’s talk.
Created 2020-01-02 17:55:14
