jueves, 9 de abril de 2015

jueves, abril 09, 2015
Heard on the Street

Fed Rates Certainty Sets Up a Fall

Assumptions of a very dovish Fed could leave investors exposed

By Justin Lahart

April 8, 2015 5:52 p.m. ET

Federal Reserve Chairwoman Janet Yellen. Investors should keep in mind that the Fed still has a desire to raise rates this year. Photo: BAO DANDAN/XINHUA//ZUMA PRESS

The Federal Reserve still has a hankering to raise interest rates this year. Investors should remember that.

Minutes released Wednesday showed that at their March meeting—that is, even before last week’s soft jobs report—Fed policy makers had pretty much ruled out raising rates in June. It won’t be until the effects of lower energy costs and the strong dollar stop weighing on prices, and inflation looks poised to go higher, that it will be time to tighten.

It took the Fed a lot longer to take June off the table then it did for investors. At the start of the year, federal-funds futures implied just a 40% chance of the central bank raising its target range at its June meeting. That ground lower, along with Treasury yields, as it became clear that the economy was slowing in the first quarter. 



Now, investors apparently doubt the Fed will raise rates in September, with fed futures now implying a bit more than a 40% chance of one going through. There is reason to believe that might somewhat understate the average investor’s forecast for rates. But it is clear that a lot more people are now betting against a September move compared with a month ago, when fed futures implied a probability of about 80%.

But similar to last year, a lot of the weakness in the economy during the first quarter looks due to temporary factors. Economists at the Federal Reserve Bank of New York estimate January and February weather was 20% to 25% more severe than the five-year average. Labor problems at West Coast ports also took a toll. If the economy bounces back, as it did in the second quarter last year, investors’ interest-rate forecasts could be in for a sudden change.

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