In its yesterday’s announcement, the Fed dropped the word „patient“, but added “an increase in the target range for the federal funds rate remains unlikely at the April FOMC meeting.” Additionally, the statement also says that the Committee has not decided on when to raise the funds rate.
Subsequently the median forecast of the Fed for the fed funds rate was lowered markedly, by 0.50-0.65% for December 2015 – 2017 to 0.625, 1.875 and 3.125, respectively. At present, the year-end target of 0.625 implies one to two hikes, with the first hike now only expected in September. Still, there is a possibility of June rate hike, provided economic data continues to be supportive and the labor market continues to improve. So, there are some considerable “conditionals” out there.
What is to be retained from this message?
- a slower pace of rate hikes is now possible,
- The USD upward trend appears to be, at least for the time being, on status quo. Because of gradually higher rates in the US, the dollar-positive constellation is fundamentally still in place, but …
- US-Equities should be supported by the stabilizing USD value,
- Focus on equities, mainly Euroland companies because of the currency benefits (although this is a “self-annihilation” process, over time).