NOVEMBER 12, 2018 — DATA CONTINUES TO PLEASE; FED SPEAKS TO RATE INCREASE
Preliminary numbers on consumer sentiment were released Friday; they came in slightly above expectations. The index is on track for its best year since 2000. Consumers’ income expectations have improved and growth in employment is anticipated to continue, but they also foresee rising inflation and interest rates.
October US wholesale prices rose by the most in six years. The producer price index was up 0.6 percent, versus a 0.2 percent rise in September. Producer prices are up 2.9 percent from a year ago. The data is not fueling inflation fears, as results are slightly lower than those seen this summer, and oil prices fell in October which should lead to lower gas prices in the coming months.
The performance of the economy is supporting the Fed’s statement saying it sees a near perfect environment to keep raising rates. Recent market volatility is not creating worries as the Fed remains hawkish on rates. The December increase is a certainty, with three more expected in 2019. However, if the economy starts to slow, the Fed may ratchet back the pace of the hikes. You can still lock into the lower rates available today by using interest rate swaps, which are, currently, the most attractive hedging option.