The Federal Open Market Committee (FMOC) released an interesting chart this past week. The chart sums up what the committee seems to be thinking, at least currently. The chart, now simply known as “The Dot Plot” is all the rage right now. Go ahead and Google “dot plot” and the first search results will lead you to multiple stories about the chart.
The dot plot shows the current thinking of each of the committee members on where they think the target rate should be set and when. All but two of them believe the rates should start rising this year. But the big story is a large group of committee members feel rates should rise very slowly. This seems to have had a calming effect on market levels, at least for now.
Fed rate policy tends to have heavy influence over current rates for mortgages and corporate lending. The very low rates we have had in the past few years helped to fuel a surge in housing and most likely had a heavy impact on the jobs number. Although housing prices in the North Chicago Suburbs has lagged behind many other parts of the country…we seem now to be on the right track.
Financial advisors have been waiting on pins and needles for a rate rise. For the last five years it has been painful to hold bonds inside of brokerage accounts that were paying next to nothing in terms of yield. The rise in rates may add some volatility to the market, but many of us are hoping that moderate yields return over the next few years and restore “normality.”
Article by: Adam Faust, Founder & Principal at Deep Blue Financial