Rate Hike
The Federal Reserve raised its key interest rate for the first time in almost a decade yesterday from 0% to 0.25%. While the rate hike is a small one, Janet Yellen has stated that she feels confident about the fundamentals driving the U.S economy, the health of U.S. households, and domestic spending. She noted pressure on some sectors in the economy, particularly in manufacturing and energy, but went on to say that the underlying health of the U.S. economy is quite sound. Yellen assured that future tightening would be gradual, dependent on higher inflation and the quality of economic data.
The nation’s largest banks, in response to the Federal Reserve raising interest rates, have already started raising their prime lending rates. Citibank, Bank of America, U.S. Bancorp, Wells Fargo, JP Morgan, and other large banks raised their prime lending rate to 3.50%, from 3.25%, effective (in most cases) on Friday (1).
Julian Emanuel, who has studied rate hike cycles going back to the 1970s, stated, “The first Fed rate hike does signal the end of the bull market, but on average that end has come two years later and 33 percent higher with a low range of nine months and 10%.”
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Our Best Always,
Bob
