Ask A Trust Officer
Dear Trust Officer:
“I’m so tired of these low interest rates. Can we expect another uptick sometime soon? Earlier this year, there was talk of one more bump before the end of the year.”
I’m afraid you may have to get used to disappointment. Many observers did expect another interest rate increase in the second half of this year, but new developments have made that unlikely, although not impossible.
The economy has been doing better, and inflation has lagged. In fact, inflation is down all around the world, raising the real possibility that the linkage between growing economies and rising prices has been broken. In July, the U.S. consumer price inflation was just 1.7%, below the Fed’s target, even as the economy grew at an annualized 3% in the second quarter of the year.
A more immediate concern is recovery from hurricane damage. It will take months to fully assess the situation and begin the rebuilding process. An interest rate hike during that time would be unfortunate, but thankfully seems unlikely.
Finally, there is the practical problem of staffing the seven-member Federal Reserve Board. There are two vacancies at the moment:
- Vice Chairman Stanley Fischer announced that he’s stepping down in mid-October, and
- Fed Chairwoman Yellen’s term of office expires in early February.
“Don’t rock the boat” may be the easiest option for the Fed while awaiting the appointment of new members.
Do you have questions concerning wealth management? If so, send them over to Adam Cox, JD, MBA; he’d be happy to help.
© 2017 M.A. Co. All rights reserved.