The long-anticipated Federal Open Market Committee (FOMC) statement came and went last week — and if you ask me, it wasn’t all that surprising. If you listened to my special podcast on Wednesday, then you know that the Federal Reserve removed the word “patient” from the official FOMC statement, just as Wall Street expected.
Now, Fed Chairperson Janet Yellen was very clear that this did not mean the Fed would be raising interest rates in the near future. Janet Yellen stated, “Just because we removed the word ‘patient’ from the statement doesn’t mean we are going to be impatient.” Janet Yellen also stressed the Fed would not raising interest rates in April, as any rate hike would be dependent on economic data.
Still, there is the widespread perception that the Fed will be raising key interest rates later this year, possibly in a “one and done” federal funds rate increase. If you paid any attention to the Fed’s statement on Wednesday, then you know that isn’t likely…
First, both Yellen and the FOMC signaled that the Fed is in no hurry to raise interest rates, given deteriorating economic data. Just Monday, the Fed reported that factory output climbed only 0.1% last month, and January’s output was revised significantly lower from a 0.2% rise to a 0.3% decline.
While utility output surged 7.3% due to severe winter weather, mining output slid 2.5% and vehicle and auto parts production dropped 3%. So, when you strip out the utility surge, the factory output report was truly awful.
Then there’s the fact that the FOMC statement made it clear that interest rates wouldn’t rise until the labor market improved and inflation was back to its 2% objective. Well, wage growth remains anemic, and deflation is spreading, not inflation. And as we’ve discussed, any rate hike would further strengthen the U.S. dollar, crush commodities and raise the underlying deflation risk.
But what’s even more telling is that the FOMC lowered its official forecast for the Federal Funds rate for 2015. It is now only expecting 0.625%, which is down dramatically from the previous forecast for 1.125%. The cut in forecast didn’t go unnoticed, as the U.S. dollar sold off sharply earlier last week.
When you add it all up, I stand by my previous comments that the Fed will not raise key interest rates this year, and that’s good news for the stock market.
So, now we can turn attention to the upcoming first-quarter earnings season, which kicks off on April 8, and I’m looking for even more impressive gains in the coming weeks.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth
, Ultimate Growth, Family 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.
