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Banking and Financial Matters Blog

Faster Pace of Interest Rate Hikes

Authored by Jeremy M. Welch
Posted on March 3, 2017
Filed under Banking and Financial Matters

As we indicated on February 16, 2017 the Federal Reserve is looking at interest rate hikes for 2017.  At a speech in Chicago today Chairwoman Janet Yellen said it is likely the Federal Reserve will increase the federal funds rate in March, which was most recently increased in December from 0.50% to 0.75%.  The stock market remained relatively flat after the announcement, indicating the recent surge had already taken into account that a rate hike is likely.  

Yellen went on further to state that as long as the economy continues to pick up more momentum as expected the Federal Reserve will likely raise rates at a faster pace.  In addition, if President Trump invests significant funds into infrastructure repairs and replacement, as he has indicated, that would spur greater inflation which would likely further cause the Federal Reserve to increase interest rates. Given the fact that the federal funds rate has been below 0.25% between 2009 and 2015, the indication that the Federal Reserve is consistently, and potentially more aggressively, increasing interest rates is an indication they believe the economic recovery is near its end.