JUNE 25, 2018 – ANALYSTS REACT TO THE FED’S SUGGESTION OF A DECEMBER RATE HIKE
Last week at its policy meeting, the Fed signaled it intends to do two more rate hikes this year, one likely in September and an additional increase in December. Following that announcement some skepticism has arisen regarding the likelihood of the fourth hike.
A rate hike in September is expected, but new economic data, escalating trade tariffs and new additions to the FOMC could delay action in December. As it stands now, the consensus’ probability of the Fed’s acting in December comes in at about 50 percent. It is worth noting the make-up of the voting members is relatively hawkish, so there is a slight bias toward quicker rate hikes.
If all four rate increases for 2018 come to pass, the federal funds rate at the end of the year will be in the 2.25–2.50 percent range. Take time to review your current interest rate obligations in light of these projections. Committing to a medium-term interest rate swap now can lock in a lower rate on your future payments.