11 Nov

Was the FOMC Being Hawkish or Giving Itself Room to Maneuver?

WRITTEN BY David Ashworth FEATURED IN Macroeconomic Analysis

Is the FOMC being hawkish?

Market participants have generally seen the October 2015 monetary policy statement from the FOMC (Federal Open Market Committee) as hawkish. But is that what the Fed intended? Let’s look beyond what was stated in the announcement.

Most of the voting members of the present FOMC are doves who tend to err on the side of caution when making policy decisions. If even one factor looks out of place, they would prefer to wait rather than pull the trigger.

Was the FOMC Being Hawkish or Giving Itself Room to Maneuver?

Given that 2015 was regarded as the year that the Fed would hike the federal funds rate—the first hike since June 2006—it is not far-fetched to surmise that policymakers were under pressure to hike rates. However, generally somber economic indicators ensured that the decision to lift off would continue to be deferred.

Is the FOMC creating room to maneuver?

With the above in mind, could the Fed have given itself just a bit of room to maneuver and get ready for a wider range of eventualities, rather than simply being hawkish?

With the addition of “at its next meeting”—a phrase absent in the previous policy document—the Fed could very well have given itself some breathing room given its upcoming policy meeting in December. Good economic pointers could lead it to a liftoff, which could justify what many in the market are thinking.

An absence of good news could retrospectively indicate that the addition of the phrase was nothing but a way for the FOMC to give itself enough flexibility to hold off a rate hike.

Final remarks

Markets are prone to overreactions and misinterpretations, and they can end up behaving too pessimistically or with too much exuberance. To a certain degree, this is the nature of the beast. However, these situations can allow some investors to rebalance their portfolios.

Corporates like Halliburton Company (HAL), TransCanada Pipelines (TRP), and International Business Machines (IBM) have already raised bonds, hoping to move before this action becomes more expensive (if it does).

Whether you’re an equity investor (MFEGX) (OLGAX) or a bond enthusiast, the Fed has made the anticipation of its December meeting interesting.

You can refer to our mutual funds page for more analysis.

Latest articles

Verizon Communications stock (VZ) closed down 2.09% on Tuesday after the leading US mobile carrier reported mixed results for the first quarter of 2019 before the market bell yesterday.

24 Apr

Nokia’s Patent Business Is Put On the Spot

WRITTEN BY Rachel Gunter

Several European auto companies want Nokia’s (NOK) patent business subjected to an antitrust probe.

The first-quarter semiconductor earnings season has begun, and the stock market is showing bullish sentiment as investors buy ahead of earnings releases.

Netflix (NFLX) is working its way through a series of price increases in several markets, including the United States and parts of Europe.

Netflix (NFLX) is aiming to add 14.6 million paying subscribers in the first six months of 2019.

Earlier today, the second-largest US automaker, Ford Motor Company (F), announced a plan to invest $500 million in Plymouth-based automotive company Rivian.