Wednesday, March 18, 2015

Fed Flash: Rates Remain Unchanged

Fed Flash: The Fed voted unanimously today to hold rates steady at 0-.25%. While there was plenty of correct speculation that the Fed would remove language reflecting "patience" in regards to a rate increase, the rest of the statement reflected that they will be very patient. A summer rate hike seems to be off the table, and in the short term, both equities and treasuries are rallying. The labor market is robust, but overall economic growth if facing headwinds, most notably the rapid rally in the US Dollar. The Dollar, bad weather, and job losses in the energy industry are digging into the boost in consumer spending resulting from lower energy prices. The new conventional wisdom is that the Fed will increase rates 1/4 point twice between September and December. That sounds reasonable to me, but if I had to guess, I would go with one increase of 1/4 point between now and year end. Economic news tends to lag, and the 1st Q GDP looks like it is going to show very soft growth. A rebound is widely expected in the 2nd Q and beyond. As for NYC real estate, a Goldilocks scenario continues for the time being. The highest risk segment of the market, in my opinion, is the ultra-high end. With sky high prices and mounting economic pressure abroad, you would have to consider whether a few oligarchs abroad might consider cashing in on a much appreciated US Dollar.

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