The Fed Remains Patient

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A Strong Labor Force, Low Inflation and a Patient Fed: How The Markets Are Reacting

The Federal Reserve announced that they are holding their rates unchanged. Even though this was expected, the markets still rallied on the news – with the DOW ending up over 400 points. It was the first time this year that the DOW closed above 25,000. The Fed meets eight times per year, however, only four of those meetings involve the committee releasing its economic projections. These economic projection meetings occur in March, June, September and December. Although the Fed has the ability to raise or lower interest rates at any of its eight meetings, it generally only does so at those four. With that said, we will have a lot to focus on as we get closer to the March meeting.

Looking back over the last year, Wednesday’s 10-year treasury (at 2.70%) is very close to the 2.73% that it was back on January 30th, 2018. The Apartment & Commercial lending rates are still hovering between 4% – 5% range, which is similar to the 2018 rates. Looking more historically, the 10-year is up around 25bps from 2017 and 75bps from 2016 (+/-100bps from 2015). Although interest rates have moved up from the ’15/’16 lows, they’re moving up at a slower pace and they’re still well under the 6% range we had prior to the recession. In historical terms, interest rates are still very low.

Along with this news, there were 304,000 jobs created in January as the labor market continues to remain on very solid ground. The unemployment rate ticked up to 4% from 3.9%, while the Labor Force Participation Rate rose to 63.2% (the highest since August 2013). Average hourly earnings rose as well. With a hold on the Fed, a strong labor market and low inflation, the environment is very strong for Stocks to rise.

If you have any questions about this news and what it means for you, reach out to us. We want to educate you on the markets in order for you to make the best decision when you decide to make the move into real estate.

 

Ken Thayer, President of RFC

Email: kthayer@rfmoc.com

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