news.goldseek.com / by David Chapman / 19 March 2017
It seems, to almost nobody’s surprise, the Federal Reserve hiked interest rates 25 basis points (bp) for the second time in three months. They also hinted at more to come later in 2017. The Fed had “confidence in the path the economy is on.” Yet the market viewed it all as benign as stocks, bonds, and gold all rallied (yields that move inversely to bond prices fell). The US Dollar also fell. The Fed noted that inflation was close to its 2% target. They did signal that any future rate increases would be “gradual.”
The Fed hike is most likely destined to clash with President Trump at some point in the future. Trump has described the US economy as a “mess” in sharp contrast to the Fed’s “confidence in the path of the economy.” Trump’s proposed tax cuts, stimulus programs, deregulation, and potential trade wars are viewed by some as potentially inflationary. One is preaching “restraint” while the other is touting “stimulus.” The Fed appears to want to “nip” any inflationary pressures early.
In Europe, the Dutch elections returned center right and center left parties to power with the far-right party of Geert Wilders well behind, thus appearing to end the populist uprising. For the moment, the EU remains viable and would not be threatened with another “Brexit.”
All this took place on the “Ides of March.” Overlooked in all the excitement was the debt ceiling that had been suspended back in 2012 to March 15, 2017. The debt ceiling could become a problem “down the road.”