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The Federal Reserve says a "resilient economy" is one reason why it's raising a key interest rate for the second time this year. The central bank increased the short-term rate a quarter point to a range of 1.75 to 2 percent. The Fed also predicts four rate hikes this year after an earlier forecast of three. I joined CBS This Morning to discuss what this means for you.
Have a money question? Email me here.
After stock markets powered forward (NASDAQ and Russell 2000 hit new all-time highs) and contentious trade talk continued, this week, the focus turns to the Federal Reserve. For the second time this year, policy makers are expected to raise short-term interest rates by a quarter of a percent to a new range of 1.75 to 2 percent. If so, it would be the sixth quarter-point bump since the current rate tightening cycle started in December 2015.
Stocks dropped by nearly 3 percent Thursday and another 2 percent on Friday, closing out the steepest one-week percentage decline for US indexes since January 2016. The proximate cause was President Trump's announcement that the U.S. would levy 25 percent tariffs on up to $60 billion dollars worth of Chinese imports.
This week marked the first time the press spotlight was on Jerome Powell, the new Chairman of the Federal Reserve.
It was just a few weeks ago that Powell succeeded Janet Yellen, and as expected, the Fed just announced another quarter-point increase in short term interest rates, a sign that the economy continues to grow.
It’s probably safe to say that the average person thinks the Federal Reserve is this big stone building in D.C. that does its own thing, if people are thinking about the central bank at all!
But the truth of the matter is that not a lot comes out of the Fed without running things by another big stone building, the one that houses the Senate and House of Representatives.
To help pull back the curtain a bit on the complicated relationship between the Fed and Congress, we are joined by my childhood friend and Fed expert, Mark Spindel, who along with Sarah Binder, recently published: The Myth of Independence: How Congress Governs the Federal Reserve.
The pages trace the Fed’s transformation from its roots as a weak, secretive, and decentralized institution in 1913 to a remarkably transparent central bank a century later. Offering a unique account of Congress’s role in steering this evolution, the book explores the Fed’s past, present, and future and challenge the myth of its independence.
Examining the interdependent relationship between Congress and its central bank, The Myth of Independencepresents critical insights about the future of monetary and fiscal policies that drive the nation’s economy.
Thankfully, the Fed today retains enough power to prevent lawmakers and the president from completely controlling monetary policy.
“Better Off” is sponsored by Betterment.
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Get ready for the first Fed rate hike of 2018. Newly minted Fed Chair Jerome Powell will preside over this week’s two-day meeting, where officials will also release their updated economic projections and future rate hikes. Analysts at Capital Economics believe that Fed “consensus is shifting from three to four rate hikes this year.”
A wild week on Wall Street came to an end with a small rally on Friday. I joined CBS This Morning to explain why such volatility might not be a bad thing.
If during a two week summer vacation, you heard that there was an escalation of tensions between the US and Korea; two international terrorist attacks; a US domestic terrorist attack; a looming debt ceiling crisis; and political upheaval in the White House, you might think that US stock markets would be in free-fall. You would be mistaken. Although markets were down over the most recent fortnight, the damage was fairly limited—about two percent overall. Even with the recent declines, the S&P 500 remains 8.3 percent higher on the year and just 2.2 percent below its record high, while the NASDAQ is up 15.5 percent in 2017. Given these numbers, its not surprising that the most frequently asked question that I have fielded over the past month has been, “I can’t believe that market is doping so well, considering (fill in the blank)…SHOULD I SELL MY STOCKS?”
The better than expected June jobs report and Federal Reserve Chair Janet Yellen’s upcoming Congressional testimony is a good opportunity to review where the U.S. economy stands at the mid point of 2017. Economic Growth: The broadest measure of economic growth is Gross Domestic Product (GDP). Over the past fifty years or so, the economy has grown by 3 percent annually. In the past decade, that rate has dropped to about 2 percent, with 2015 being the best year (+2.6 percent) and 2009 the worst year (-2.8 percent).
Get ready for a Fed interest rate hike this week. The February jobs report showed that the US economy added a larger than expected 235,000 jobs, the unemployment rate edged down to 4.7 percent and annual wage growth bounced back from a revised 2.6 percent in January to 2.8 percent, ahead of the 2.7 percent average seen in the second half of last year. The increase in wages demonstrates that the labor market is tightening and that state-level minimum wage hikes are filtering through the economy.
