Last week, investors got the latest release of the FOMC meeting minutes. Although at first glance the minutes appeared to be considerably more hawkish, the central bank did also cite some risk it sees in the New Year. While it can also be a matter of interpretation to a degree, upon a closer examination of the minutes the Fed still seems rather cautious. The central bank voted to raise rates last month for just the second time in a decade, and while the Fed now forecasts three rates hikes this year, those plans could apparently change quickly. The Fed could potentially hike faster and become more aggressive, or it could also elect to leave rates alone. There is also the possibility that rates could even be cut again.
The minutes took some of the recent steam out of the dollar index and yields rose. The Fed did not mention Donald Trump by name, but it seems that the central bank is concerned over the unknowns currently surrounding the new administration’s plans.
Stocks and the dollar have risen sharply since the November election, while interest rates have also been climbing. The notion of tax cuts and fiscal stimulus has given investors reason to buy, but it remains unclear-very unclear-exactly what type of fiscal spending will be seen and just how much of it.
Furthermore, it is unknown how much of an effect such fiscal spending will have on economic output.
In a recent article on CNBC.com, the Fed minutes reportedly stated: “Most participants attributed the substantial changes in financial market conditions over the intermeeting period-including the increase in longer-term interest rates, the strengthening of the dollar, the rise in equity prices, and the narrowing of credit spreads-to expectations for more expansionary fiscal policies in coming years or to possible reductions in corporate tax rates.”
The central bank’s economic projections, however, did not show a sizable rise. The committee is now reportedly projecting 2017 GDP growth of 2.1 percent compared to their September estimate of 2 percent.
The FOMC highlighted what it sees as potential upside risks, and also outlined some possible downside risks. Downside risks included the potential for a trade war under a Trump administration as well as the possibility that its economic policies may not live up to expectations.
With so many unknowns, and with upside as well as downside risks; the Fed may very well remain on the path of slow and steady regarding rates.
Given the amount of both economic and geopolitical uncertainty, now may be a good time to look for ways to diversify.
Hard assets like physical gold and silver may be a great addition to a portfolio. These metals have been considered a reliable store of wealth and value for centuries, and may potentially provide a meaningful hedge against numerous economic difficulties.
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Don’t wait for the next stock market crash or the next major economic crises before taking action. Explore your options for physical gold and silver ownership today. Call us at 1-800-341-8584 to get started.Tags: advantage gold, central bank, expectations, Fed, fiscal policy, gold, interest rates, trump