Chart of the week

A much slower Fed, now on hold?

See why a growing consensus among FOMC members thinks patience is needed regarding monetary policy – and what that may mean for income investors.

January 18, 2019 | 1 minute read
Fed rate hike cycles over time
  • Kansas City Fed President Esther George commented this week that “a pause in the normalization process” would allow the Fed to assess the pace of economic growth and avoid an “overtightening of policy.”1 George, a new FOMC voting member, has now joined a chorus of Fed presidents preaching patience with regard to monetary policy.
  • Three other new FOMC voting members – Boston Fed President Eric Rosengren, Chicago Fed President Charles Evans and St. Louis Fed President James Bullard – have each separately acknowledged their willingness to “wait for greater clarity before adjusting [monetary] policy,” as Rosengren said in a January 9 speech.2
  • The current rate hike cycle is already the longest and slowest of any the Fed has enacted in the past 30 years. As the chart shows, it also features the lowest rates by far, both at the start of the rate hike cycle and likely at its end.3
  • Fed policymakers as recently as their December 2018 meeting forecasted two more rate hikes for 2019.4 However, the number and timing of potential rate hikes has since become significantly more uncertain.
  • With short-term rates once again seemingly set to stay lower for longer and longer-term Treasury yields still well below their Q4 highs, investors may continue to face significant challenges in generating adequate levels of income in the months ahead.5

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