The Fed Will Likely Repeat Last Month’s Verdict

The Fed will be finishing their meeting today, as the government issues a number of reports on the economy and indications of our economy’s health. These reports range from manufacturing growth, consumer spending, home prices, to job gains, just to name a few.

As the Federal Reserve chairwoman, Janet Yellen, stated in her first weeks, the Fed will have to keep all options open in order to decide when to raise interest rates.

And recent speculation from the media believes that the Fed will likely repeat last month’s verdict, of keeping rates unusually low to support a still- not so great economy, even after the job market strengthens. As discussed in this recent article from the New York Times, At Meeting, Fed Likely to Again Cut Bond Buying, “Tying the response of policy to the economy necessarily makes the future course of the federal funds rate uncertain,” Yellen tells the Economic Club of New York. “But by responding to changing circumstances, policy can be most effective at reducing uncertainty about the course of inflation and employment.”

Yellen’s message has shifted from her predecessor Ben Bernanke’s approach, who focused primarily on the unemployment rate, in the making the decision on when to reduce its bond purchases and increase interest rates. Yet, some believe the Fed’s efforts to continue to keep rates super-low may raise the risk of igniting inflation or inflating bubbles in assets like stocks or homes.

For investors, financial markets don’t like uncertainty and with all this ambiguity the big question is what can you do about it?

As we discussed last week, start planning for 2014! The first thing on your list is to get your tax return reviewed and the next thing you need to do is to take a look at your portfolio. It would be prudent to hold 5-10% of your assets in an inflation protected portfolio especially if you are concerned about future inflation. If you have not done so and you would like to speak with us more about this, simply give us a call at (775) 853-9033.