When the Federal Reserve released its monetary policy statement last week, there were no surprises — no rate increase, no hint of when to expect an increase and no, well … nothing.
Fed Chair Janet Yellen toed that dovish line in a press conference shortly after the statement was released, not budging an inch.
While this lack of action bolstered the markets, which were already expecting nothing from the Fed, last week’s release actually holds important clues to the Federal Reserve’s inner workings…
Clues that signal the Fed’s next move, as well as signal where we want to be positioned as investors.
You see, every quarter the Fed includes economic projections in its release, such as expectations for gross domestic product (GDP) growth, unemployment, inflation and the fed funds rate. The sole purpose of this data is to provide greater clarity on the Fed’s forward-looking expectations.
What’s more, this data provides us with clues as to what actions the Fed may, or may not, take at its upcoming meetings.
In its latest meeting, I saw a continuation of a pattern that we at The Sovereign Society have followed for some time. It’s a pattern that our investment director, Jeff Opdyke, saw as so important that he shared it with a small group of readers last weekend — and I want to share it with you today.
In short, this pattern tells us that the Fed doesn’t expect to raise rates by any meaningful degree any time soon, critically impacting your ability to generate income for at least another decade. Let me explain…
Falling Expectations
There were two important data points that stood out in the Fed’s recent report: the fed funds rate and GDP growth.
First, the fed funds target rate is falling. The Fed lowered the rate from 1.4% to 0.9% for 2016, confirming expectations that the central bank was scaling back from four potential rate hikes this year to just two — a considerable change from the December meeting not three months prior.
