As we approach another FOMC this week, much of the short-term tone of the market will depend on the Fed. In order to analyze what the Fed is likely to do, let`s begin with their mandate, which is price stability (fighting inflation) and full employment. In addition, the Fed has taken on a third objective of financial stability.
When I look at what`s happened since the Brexit vote, all signs point to a renewed path towards interest rate normalization. Therefore it would be unsurprising to see the FOMC statement take a more hawkish turn. Expect the post-meeting buzz to focus on one or two rate hikes for the remainder of 2016.
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