Federal Reserve Chair Janet Yellen has led her policy committee over an obstacle course in 2016. Having agreed to the general principle that policy renormalization should continue this year, she has found obstacles to stop the Federal Open Market Committee (FOMC) from acting at any of its seven regularly schedule meetings. Reading through the minutes of those meetings, threats on the horizon included “global economic and financial developments,” “the surprisingly weak May employment report,” and “the British referendum on membership in the European Union.”1 Unmentioned in print but obviously shaping the September and November discussion was the US election. With the finish line to 2016 in sight, we think it is almost certain that “…the case for an increase in the federal funds rate has continued to strengthen…” to the point that gets them to break the victory tape with a 25 basis point firming of policy announced at the conclusion of its December 13th-14th meeting.2
1 Minutes of the FOMC meetings can be found at https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm.
2 This repeated statement was in the November statement, among other places and can be found at https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm.