Monetary Policy Continues in the Spotlight

February 23, 2015

Monetary Policy Continues in the Spotlight Photo

The highlight of the past week was the release of the January Federal Reserve minutes. In our opinion, the Fed minutes were "dovish" relative to market expectations. The Fed saw the risks to the economy as balanced. Offsetting strong employment gains were the noted concerns about the strong dollar, energy prices, and geopolitical issues. We believe that any decision to raise interest rates will be highly dependent on economic data, with an eye towards both the risks of inflation and employment going forward. Given that inflation is likely to remain low for a prolonged period of time, the Fed can continue to be patient in deciding when to increase interest rates.

In the week ahead, look to Janet Yellen's Congressional testimony for more information regarding the Fed's position on the economy and interest rates. We expect markets to be sensitive to any perceived change in Fed policy, especially with stocks at or near their highs. We do believe we have seen the lows for oil prices this year and that oil will trade in a range from $45 to $60 for the next several quarters. We also think the dollar will continue to be strong in the upcoming quarters.

Tags: Monday Morning O'Malley | Oil | Inflation | Federal Reserve | Monetary policy

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