Oct 262015

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By G. Steven Bray

Steady as she goes. Last week was fairly quiet in terms of economic data, and interest rates stuck to their current range. This week could bring a little more excitement.

The Federal Reserve meets Tues and Wed. Almost no one expects the Fed to raise short term rates, but that doesn’t mean the Fed can’t launch some fireworks. The focus will be on the Fed’s post-meeting statement. Really, I only see downside risk for interest rates. If the statement suggests the Fed wants to raise rates in Dec or hints that the global economic picture is improving, I suspect rates will edge up. I think the Fed would have to paint a gloomy economic picture for rates to head lower, and I don’t think that’s likely.

Thurs, the government releases the 3rd quarter GDP numbers. While this is backward looking data, lessening its impact, rates may respond if the headline number differs greatly from the downwardly-revised estimate. More important will be if markets can glean some expectations for the 4th quarter and the Christimas shopping season.

Finally, we have the ongoing budget and debt ceiling talks between Congress and the President. If the talks collapse, rates could improve because of the potential impact on the economy, but volatility and uncertainty could negate any improvements.

If this week doesn’t bring some excitement, next week is a jobs report week. The last two jobs numbers have been disappointing to say the least. A third lousy report could push rate hike expectations back until next summer. We’ll talk about that more next week.

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