Rate Hike Outlook for December FOMC Meeting

The Federal Reserve concludes the final FOMC meeting of 2016 this Wednesday at 2:00 PM ET. A slew of recent strong economic reports showing progress towards full employment & inflation goals, combined with the massive equity rally pushing the DOW to all-time highs, has many expecting a rate hike.

According to the CME Group’s FedWatch Tool, there is a 97% chance that the Fed bumps rates up by 50 – 75 bps. The rate increase would be the first since last December, and only the second since the Great Recession.

In addition to sizing up the monetary policy for 2017 & possibly integrating additional rate hikes throughout the year, Yellen and CO are faced with a new challenge – managing a new incoming White House Administration whose historical comments had been fairly critical of the Fed, and analyzing a potentially aggressive fiscal policy with infrastructure a predominant focus.

Keeping this in mind, there is a degree of ambiguity looming around the new Administrations economic policies, and as investors, it’s important to be prepared the unexpected….no rate hike at all!

Regardless of the Fed’s decision, high market volatility is a possibility, thus it’s important to closely monitor open positions and leverage protective stops with appropriate risk/reward.

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