I think that in light of the strong labor market as well as inflation moving up closer to its goal, the Fed will raise rates again in June. The most common interpretation of the Fed Funds Futures curve shows that the that hikes in June and September are priced in, though the market is uncertain of a fourth hike in 2018. Two more hikes would bring the target rate to 2.25%, roughly where the FOMC sees the rate ending the year. The committee sees an additional 0.75% in 2019 so if they are correct, and they are of course the ones who get to decide, the upward move in rates will begin to slow economic performance (by moving real rates above the neutral level) sometime twelve to eighteen months from now.
As always, we at Astor will be monitoring the economy closely to inform our investment decisions. To see more of our weekly collection of economic charts, visit www.astorim.com/charts.
This article was written by John Eckstein of Astor Investment Management, a participant in the ETF Strategist Channel.
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