It looks from here that Christmas is coming early as interest rates appear to be staying low through at least December. No mention of a rate hike was made by Fed Chair Janet Yellen at the conclusion of Wednesday’s meeting.
The Fed once again indicated that they are looking for sustainable growth in the labor market, as well as measures of inflation to get to the target of 2% per annum, before they hike interest rates. While the first Q2 GDP reading came in at that number yesterday, there will be some half dozen future stabs at it and plenty of revisions to follow. A contributor to wage-based inflation, today’s announcement that the Employment Cost Index rose 2.0% from last June is also in line with Fed expectations. Moreover the pitiful 0.2% increase over the last quarter (that represents the smallest in 33 years) is most likely the after effect of the significant jump in Q1 that was a consequence from the Affordable Care Act implementation among employers.
