Weekly Market Commentary 05/04/2018

Say what you will about dysfunction in Washington, but the Federal Reserve is one agency that seems to be getting things right. To be sure, the central bank is hardly in position to claim, “mission accomplished” regarding its agenda. But it is as close to reaching its dual objectives of full employment and 2% inflation as any time since the Great Recession. Not surprisingly, at this week’s policy meeting Fed officials appeared quite pleased with the direction the economy is taking and intends to stick with their plan to gradually nudge interest rates higher. Although they left rates unchanged this month, as expected, the futures market is pricing in nearly 100% odds that quarter-point hikes will take place at both the June and September policy meetings and a nontrivial chance that a third rate increase will happen in December.