Fed in a Box Redux

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Economy  |  June 16, 2016  |  

Venturi’s initial blog post, Fed in a Box, dated August 15th, explained how the Federal Reserve would move glacially in raising the Fed Funds rate to avoid punishing debtors with a flurry of rate increases in a short period of time, a decision that would create a combination of risks with the potential to derail our fragile growth trend . Ten months hence, the Fed raised rates once and backtracked on their plan of a series of increases. Save for a steady decline in the U.S. unemployment rate, little else supports a rate increase. Instead, we have experienced underwhelming economic growth—both here and globally, a corporate profits recession, mild inflation, a persistently strong US dollar, and nagging European concerns (now being the Brexit vote & Greek reforms). Even those investors myopically focused on low unemployment trends must consider the context of said trends, as the labor participation rate has plummeted in recent years (see illustration).

fed funds rate