Decoding the Fed: A Visual Exploration of Interest Rate Changes
A Visual History of Fed Moves and Implications for SPX and Bonds
To navigate the complex waters of the financial markets, understanding the Fed's actions is akin to a sailor studying nautical charts. By examining past interest rate decisions, investors can better anticipate the course the Fed might steer in the future.
Understanding the Fed's Monetary Policy
The Federal Reserve wields a powerful tool in shaping the economy: interest rate adjustments. By carefully calibrating the federal funds target rate, the Fed aims to balance economic growth with price stability.
When inflation heats up, the Fed typically raises interest rates to cool down economic activity. Conversely, during periods of economic weakness, such as high unemployment, the Fed may lower rates to stimulate growth.
A myriad of economic indicators, including GDP, consumer spending, and industrial production, influence the Fed's decisions. Moreover, unforeseen events like financial crises, pandemics, or geopolitical tensions can significantly impact monetary policy.
To gain deeper insights, this edition compiled historical fed funds data alongside detailed narratives explaining the underlying factors that shaped these decisions. While economists and policymakers undoubtedly play a critical role, it's essential to recognize the influence of political and economic landscapes on the Fed's actions.
The provided tables outline the Federal Open Market Committee's (FOMC) decisions to adjust interest rates. Each entry specifies the meeting date and the resulting interest rate range. The charts that follow, analyze with technical references the subsequent moves in SPX.
This is the first of a series of publications analyzing implications in the stock market and the bond market.