Weekly Market Update: March 20, 2017
What We Learned Last Week
The Federal Open Market Committee raised the range for its target federal funds rate, the rate that anchors all short-term interest rates, to 0.75 – 1 percent. That lies a full percentage point below the Fed’s 2 percent longer-run inflation target. So, because the real federal funds rate would be expected to lie at least a full percentage point above inflation over the long-run in a normal economy, what the Fed anticipates in coming years, the aim continues to be to move the funds rate to at least 3 percent eventually.
Future markets seem broadly aligned with the Fed’s idea of a 3 percent federal funds rate down the road. So, if the Fed raises rates in line with its forecasts, the market response will be anti-climactic.
Sentiment surveys remain upbeat, but the rebound in manufacturing implies there’s more to recent upbeat economic activity than sentiment.
What We Expect to See in the Week Ahead
Durable goods indicators likely improved in February.
New home sales likely picked up as well.
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