Fed Outlook Still Allows For Interest Rate Hikes

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By Jacob Maslow

Interest rate comparisonIt is very easy for traders who are long on the US stock market to breathe a collective sigh of relief with the recent US Federal Reserve open market committee report. It appears that there is enough language there for both long and short players to take a lot of comfort in. If you are thinking that the US Federal Reserve will eventually raise interest rates, there is enough language there. Sure, they dropped the word “patient”, but there is enough language there to indicate that the US Federal Reserve can and might raise interest rates later on in the year.

This is typical Federal Reserve doublespeak. The US Federal Reserve has always mastered the art of speaking from both corners of its mouth. On the long end, the US Federal Reserve also lowered its economic projections for the year. It sees the US economy slowing down. This, of course, makes long traders excited because if the US economy does slow down or softens, this makes interest rate hikes less likely. After all, why would the US Federal Reserve slam on the brakes precisely at the time when the motor of the US economic recovery is slowing down?

This is typical US Federal Reserve talk. In fact, the overall effect is as if it hadn’t issued a report at all. The real indicator of any US Federal Reserve interest rate hikes is continued strength in US jobs figures and other key indicators of economic recovery.

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