The Federal Reserve raised interest rates by 25 basis points to a range of 1.25% to 1.50%. This is the third 25 basis point rate hike in 2017 and in-line with forecasts set by central bank officials earlier this year.
- Central Bank officials forecast that three interest rate hikes are likely in 2018, indicating higher confidence in the U.S. economy. Several economists are estimating that number could be as high as four with the added growth that would likely come from tax reform.
- U.S. stocks advanced as the central bank raised its 2018 GDP forecast sharply from 2.1% to 2.5%. Meanwhile, U.S. Treasury yields moved lower despite the Fed’s decision to raise interest rates for the final time in 2017.
- Inflation remained below the Fed’s 2% 12-month target but is expected to stabilize over the medium term. Adjusting for the hurricane-related fluctuations, job gains increased as the unemployment rate continued to decline.
- Current Fed Governor Jerome (Jay) Powell will succeed Janet Yellen as the next chair of the Federal Reserve in February 2018 following his widely expected confirmation by the Senate. Mr. Powell has supported Ms. Yellen’s cautious stance and gradual pace of interest rate increases which suggests continuity in monetary policy. However, in contrast to Ms. Yellen, Mr. Powell supports further deregulation in the banking sector.
- New England Investment & Retirement Group continues to believe that investors should be patient and adhere to a well-constructed, diversified investment portfolio anchored to your goals and time horizon. Despite elevated uncertainty such as a new Fed Chair and U.S. monetary policy announcements, we do not find compelling reasons at this time that would justify overriding our asset allocation methodology.