PLANO, Texas—Following last week’s decision by the Federal Reserve to not change interest rates, one analyst is offering his take on how to read between the lines of the statement the Fed issued with its decision.
Brian Turner, president and executive director of Meridian Alliance, pointed to the Federal Open Market Committee’s statement that “The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2% objective over the medium term,” as deserving more analysis.
“This statement alone acknowledges that recent ‘improvements’ in the reported job growth and unemployment are bogus and that their policy on inflation has been as disaster,” said Turner. “Apparently, the market got wind before the announcement because it was already adjusting market yields downward before the presses began. The benchmark 2- and 10-year Treasury rates dropped from 0.80% to 0.69% and 2.30% to 2.22%, respectively. That’s called short-term profit-taking.
“The Federal Reserve may finally be understanding one basic principle – it is more dangerous to the economy to tighten money policy by raising interest rates too soon than by remaining in a low-rate environment until all basic components of the economy acknowledge recovery – something that is still far away,” Turner continued. “So we’re still on track. Be selective on credit-related rate decisions (loans), don’t get antsy about raising non-term share rates and continue to build our liquidity profiles.”