RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

The Federal Open Market Committee, or FOMC, meets this week on Tuesday and Wednesday. It is highly expected that on Wednesday, March 15th at 1:00PM Central time, there will be an interest rate announcement. There appears to be a nearly 100% chance for an interest rate hike now with more to come. JP Morgan is anticipating the possibility of four rate hikes in 2017, three hikes in 2018, and returning to neutral in 2019 at an unchanged rate of 3.0%. Bloomberg surveyed 45 economists on March 7-8. They concluded there could be three quarter point hikes in 2017. These hikes would occur in March, June, and December. Janet Yellen’s term expires next February. White House sources have said there is a 15% chance that President Trump will re-appoint her for another four years.

So what usually happens when interest rate hikes begin? Bull markets may stumble. Bond yields will climb. The economy could slip into a recession…BUT we don’t know for how long! In the past, a recession has come as quickly as eleven months after the first rate hike or as late as 86 months after the first rate hike. The good news is that no one expects the gradual return of interest rates to a more normal level to be the seismic shock many seem to fear!

Susan Green