By Matthew Kerkhoff
The two-week rally that we’re sitting on is predicated on a reversal of the trends that have plagued the market for the last year: a stronger dollar and weaker commodity prices.
The driving force behind these moves has been a Federal Reserve that is anxious to normalize policy.
For months now you’ve heard me make the case that raising rates would be in direct opposition to the inflation component of the Fed’s dual mandate. The minutes from the latest Fed meeting echo this sentiment, as worries about inflation were front and center.
The Fed’s preferred inflation measure, personal consumption expenditures, has been below its target for over three years now. Some Fed members currently don’t project inflation to reach the 2% target until 2019.
This implies, based on the Fed’s congressional guardrails, that rates will stay low for a long time. They probably won’t stay at zero for much longer, but they will ... Log in or subscribe to continue reading.