Low inflation = Low rates

In regards to the bond markets and stock markets, today was Fed Day!! It was the last Fed meeting of 2014, and everyone is a twitter about the monetary policy statement that was released at 2:00pm (EST) today. Luckily the Fed Fund Rate did not change, only the wording from: “considerable time” was replaced with “can be patient in beginning”. Fed Chairwoman, Janet Yellen, as of 3:00pm this afternoon (EST), was making comments along the lines that rate hikes are unlikely for the next couple of Fed meetings – “accommodative rates here for a very long time”, she continued, noting the lower oil prices which are holding down inflation. The stock market has responded nicely to these comments, which brought the bond market down, just slightly. But, the good news is: Interest rates are below 4%!!!

Thanks to the spat between Iraq and Saudi Arabia, and controlling the crude oil pricing or lack thereof, which has led to the Consumer Price Index (CPI) in November falling by 0.3%, which has led to falling oil prices beyond expectations. We have all enjoyed a robust economic outlook, lower interest rates and stock market improvements. Just a quick economics 101 lesson – low inflation = low rates. Just for your economic chart fun, I have attached a CPI chart for your viewing, at the bottom of this email. So, enjoy your drive over to Sunriver during the Holidays, it will cost you less!!