Fed’s Bullard: Rate Hikes Won’t Come Until Fiscal Uncertainty Resolved

St. Louis Fed President James Bullard said Thursday that interest rates could stay low at least through the end of 2017, with the Federal Reserve under no pressure to lift rates unless the ongoing fiscal uncertainty is completely resolved.

His comments came after last week’s Federal Reserve meeting, in which the cabal left rates unchanged, as was roundly expected. The Fed next meets in March, but investors shouldn’t anticipate to see a rate hike then, either. From Reuters:

“It is unlikely that fiscal uncertainty will be meaningfully resolved by the March meeting,” said Bullard. “We don’t have to move. We have a lot of fiscal uncertainty. Why not wait until that is more clearly resolved?”

While many analysts believe Trump-fueled inflation will come to a head this year, Bullard isn’t buying it:

“It does not appear that undue inflationary pressure is building so far,” Bullard said.

The Fed last raised rates in December 2016, marking only the second interest rate hike in the previous twelve years. Rates have been left at or near all-time low levels since the financial crisis hit full swing in late 2008. Mainstream perception is that the Fed will accelerate its rate hikes this year, but that seems increasingly unlikely amid so much global political uncertainty.

Bullard’s comments helped spark a sell-off in the bond markets this morning. The iShares Barclays 20+ Yr Treasury Bond ETF (NASDAQ:TLT) was trading at $120.80 per share on Thursday morning, down $1.44 (-1.18%). Year-to-date, TLT has gained 1.40%, versus a 3.19% rise in the benchmark S&P 500 index during the same period.

TLT currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #18 of 27 ETFs in the Government Bonds ETFs category.

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