No Need to Worry About Rising Interest Rates Yet

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Due to a resurgent U.S. dollar and more speculation about when the Federal Reserve will raise key interest rates, the U.S. stock markets fluctuated again but ultimately ended last week slightly lower. The Dow Jones Industrial Average slipped more than 1% in the past week, while the S&P 500 fell about 0.8%.

Federal Reserve Operation Twist

What’s interesting is that despite all the speculation on Wall Street surrounding interest rates, the Fed is trying to stay out of the spotlight. Earlier last week, the Fed announced that Chairwoman Janet Yellen will not attend the Kansas City Fed’s annual conference in Jackson Hole in late August.

Top central bankers from around the world and the financial media attend the Jackson Hole conference every year — and it is often the focus of many traders after they return from summer vacations.

The statement added that while Yellen will not attend Jackson Hole this year, she will participate “from time to time in future years.” Translated from Fedspeak, Yellen is shying away from the financial media, as well as not showing any support for the historically hawkish Kansas City Fed.

So, it is becoming very clear that Yellen does not want to discuss an interest rate hike, and in my opinion, is further proof that the Fed does not want to raise key interest rates in September.

As we’ve discussed, the Fed has plenty of reasons to not lift interest rates this year, even with the better-than-expected new homes sales, increase in consumer confidence and in-line durable goods orders reports this week (more on that later). And a very big reason is negative U.S. economic growth.

On May 29, the Conference Board reported that U.S. GDP growth contracted in the first quarter, falling to a -0.7% annual pace. The initial estimate was for 0.2% growth. The reasons for the contraction in the first quarter are a surging trade deficit and low inventories. The U.S. dollar is clearly negatively impacting U.S. exports — and it’s a much bigger problem than the west coast port slowdown.

As a result, economists have estimated second-quarter GDP to be an annual rate of 1% or less.

Fed Vice Chairman Stanley Fischer noted last week that decelerating global growth could also negatively impact the U.S. economy — and would like cause the Fed to hesitate with any interest rate hike. So, disappointing GDP growth here in the U.S. and overseas is likely to weigh on the “data dependent” Fed and help keep interest rates near zero for the foreseeable future.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip GrowthEmerging GrowthUltimate GrowthFamily Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/06/the-fed-yellen-interest-rates/.

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