Sep 222015
 

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By G. Steven Bray

The Federal Reserve didn’t just postpone a rate hike last Thurs. It appeared to give itself a new job description, and in the process, introduced new uncertainly into the markets.

The Fed has a dual mandate to try to maximize employment and keep inflation in check. On Thurs, the Fed said it now is concerned about global growth prospects and market stability.

Granted, both may affect the Fed’s original mandates, but identifying them as influencing the Fed’s rate decision is, well, interesting. And what really got markets moving last week was the Fed’s gloomy assessment of global growth. While markets have noticed disappointing growth headlines, the Fed statement caught everyone by surprise and has them thinking is it really this bad?

So where does this leave us? If the global economy is tanking, rates should improve. The Fed said it still wants to hike rates before the end of the year, but that seems unlikely given its new focus on global growth. On the other hand, the most recent jobs data has shown a slight untick in wages. Should that continue, US inflationary pressures could build even as global pressures relax. Any hint of inflation could send rates up quickly.

That leaves us right back in the previous rate range with no clear direction for higher or lower rates. If you haven’t locked your mortgage rate, float cautiously.

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