The Federal Reserve decided today it once again will not raise interest rates. Nine years after the start of the financial crisis, eight years since ZIRP (Zero Interest Rate Policy) was enacted with a near zero 25 basis point federal funds target rate – we’ve seen just one quarter of a point increase and remain entrenched in unprecedented monetary policy waters. This, despite the fact that the unemployment rate is currently at 4.9%, materially better than its 30 and 50 year averages, and Leading Economic Indicators (LEI) have been in expansion for seven years. In their statement today the Fed said in part: “The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.” If not now, when? The Federal Reserve continues to act with imprudence, focused on minutiae instead of the long term sustainability of their policy decisions, and worse yet, a case can be made they have become beholden to markets and possibly politics. The Fed simply can no longer see the forest for the trees, and this reality needs to be factored into everyone’s investment strategies.
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