Weekly Economic Report
Suddenly there seems to be a lot more concern about debt now that interest rates are rising. We know debt has been on folks’ minds, but the angst has elevated since the stock market started slumping and the Federal Reserve appears likely to continue raising rates. We were in Madrid last week, with President Bostic from the Atlanta Fed, and his comments confirm that monetary authorities still feel policy is somewhat accommodative – so rates will keep moving higher toward their 3%+ long run target. Many of the financial sector representatives in attendance were aghast at this possibility, suggesting that rates have finally moved past neutral into modestly restrictive space. We expect the Fed will raise rates in December, and that two hikes seem likely in the first half of 2019. As we noted at the start of 2018, the Street will have to price in the Fed’s promise of three more hikes in 2019 before intermediate term rates are painful enough that perhaps that scenario does not occur. They still have not done so, so rates are not restrictive enough for the FOMC to consider stopping.