The Federal Open Market Committee unanimously voted to raise the range of the federal funds rate by 0.25% to 0.50% – 0.75% (from 0.25% – 0.5%) on 12/14/2016, citing progress in economic activity and labor market growth. This rate hike marks the first for 2016 compared to expectations for two-to-four rate hikes this year back in 2015.
The reality is the market already jacked up rates for all consumers by a more aggressive 0.5% – 0.75% this year as Treasury bonds sold off post Trump’s victory. The 10-year Treasury bond yield is now hovering around 2.5%, the entry point I’ve been looking for to build a municipal bond portfolio.
With unemployment below 5% for the past year, a level that many economists consider to be full employment, it seems like an inevitability there will be inflationary pressure due to higher wages, higher demand, and higher prices.