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We’re Entering TrumpWorld – The Fed to Raise Rates Today

Posted on December 14th, 2016 | Author: Robert C. Gabrielski

As the Fed wraps up their last of its eight 2-day meetings this year it’s likely to raise its key short-term interest rate by 0.25% or 25 basis points.  So, what’s motivating the Fed to raise the rate?  A number of factors are in the mix: (i) the base unemployment rate (the Department of Labor “U3 Rate”) is at its lowest since 2007, and we all remember the tail end of that boom; (ii) this year alone, the US has added approximately 2,000,000 jobs to date; (iii) with the U3 Rate at 4.6% there’s pressure building to increase wages, as employers look to add staff in a tightening employment market; and (iv) the Fed is expecting inflation to kick in during 2017.  Is the Fed also concerned about the heating up of US equity markets?  Could be, but I don’t really see any significant comments from the Fed yet.  However, one thing that will happen when TrumpWorld commences on Friday, January 20, 2017, is that President Trump will have two appointments to the Fed: (i) Fed Chair Janet Yellen’s successor for her term expiring in January 2018; and (ii) Vice Chair Stanley Fisher, who is up for re-nomination in June 2018.  Ultimately, Trump will have the ability to appoint four persons to the Fed during the first 18 months of his presidency.