Stocks Drop on Fed Minutes

The S&P 500 has lost about 25 points in the last 45 minutes. According to the latest Fed minutes, the Fed is considering raising rates next month. In my opinion, that would be a big mistake.

The unusually frank bulletin was delivered in the official account of the Fed’s April meeting, which said explicitly that most officials thought “it likely would be appropriate” to raise rates in June if the economy has rebounded from a weak winter.

That message is sharply at odds with the expectations of investors, who have largely written off the chances of a June increase, betting instead that the Fed would leave rates unchanged until later in the year. Measures calculated from asset prices suggested investors saw less than a 20 percent chance of a June hike before Wednesday.

There is no certainty that the Fed will move at its meeting on June 14 and 15. The available economic data does not yet appear to show the strength that the Fed wants to see, and some officials said in April that there might not be time to gain the necessary confidence before the June meeting. But the account made clear that Fed officials want markets to take the possibility much more seriously.

If you guessed the Fed minutes came out at 2 pm, you were correct.

and the 10-year bond.

Posted by Eddy Elfenbein on May 18th, 2016 at 2:36 pm

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