Thursday is a big deal.
The Federal Reserve will announce whether it is raising interest rates for the first time in this economic recovery.
Now, whether the Fed will actually move is anyone’s guess.
But either way, this is a super important event for economists, traders, investors, and anyone else who pays attention to the Fed on a daily basis.
But for many regular people, Thursday’s decision is likely to be just another headline.
During a conference call with clients last Thursday, Citi’s US economist Peter D’Antonio highlights the one thing people who don’t spend all day worrying about the Fed could take away from the announcement:
What they will notice is the tone in the Fed’s statement. And so for instance, you know, if the Fed — let’s just say the Fed moves and talks about the reason being the economy is in great shape and blah, blah, blah, and the headline is that the economy is in great shape, the Fed says the economy’s in great shape, that’s the kind of thing that can increase confidence.
And so, for the regular consumer, it’s not really about a 25 basis point increase, but about what the Fed’s announcement says about the state of the economy.
D’Antonio notes that a bullish message from the Fed won’t lead to an immediate spike in consumer spending, but that’s not to say a small rate hike means nothing for the consumer immediately. For instance, people with variable rate loans would notice a difference, even if it’s just a blip.
As some economists have noted, a plausible scenario for Thursday is that the Fed keeps rates unchanged and attributes the delay to the recent volatility in markets. Meanwhile, the Fed in this scenario could signal that the economy has made tremendous progress from the depths of the recession.
And so as D’Antonio notes, that message would be the most important take away for the average person.
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