The Fed Fund Rate Announcement & Interest Rate Decision

by The Investment U Research Team

After a free fall that started mid-Friday investors will get to see if the Federal reserve can inspire Wall Street to continue its forward (and upward) momentum. Stock futures have been relatively unchanged as the market pulled back over the past few days.

This bodes well for an interesting morning as the Fed’s interest-rate decision is due at 2:15 pm and should indicate their bias towards future rate increases.

It’s unthinkable that they would increase the Federal funds rate during this announcement, but as the markets are a forward pricing mechanism, everyone will be looking for signals to the next rate change.

The Fed will be cautious not to declare victory, but it’s going to give some positive comments about their own performance, and the (small) success they have had in pulling the economy back from the brink.

This comes even as pundits look to label this current stock bubble a product of the Fed’s easy money policy. But ever the golden goose, low interest rates help flood the markets with cheap money and investors aren’t going to be happy when that starts to come to an end.

But, while the Fed may not look to kill said goose, they may want to carve off a leg or wing…

The less that Bernanke says about future tightening of monetary policy and interest rate increases, the better the markets will respond.

• Look Out for Lots of New Cheap Debt
• The Fed Gets Zero for Zero
• The Friedman Effect: Is Another Bear Market Around the Corner?

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