Insiders Activity of the Fed

Apurva Sheth
Insider activity almost never goes unnoticed in stock markets. Not only regulators but investors also keep a close eye on activity of company insiders. Insiders such as promoters, CEOs, CFOs, and directors know the ins and outs of a company and have access to every bit of sensitive information that could affect the stock prices. Insiders know far more about company's prospects than outsiders ever could.

Many investors use insider and institutional shareholding information to make well-informed investment decisions.

Why am I talking about insiders today?

In a few days, a small group of insiders will meet to decide the fate of global financial markets.

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Of course, I'm referring to the 17 September Federal Open Market Committee (FOMC) meeting where members-the world's most influential market insiders-will decide whether to hike US interest rates or keep them at the current level of 0.25%.  

Everyone involved in the financial market has their eyes fixed on this event. And the debate-to raise or not to raise-has advocates on both sides.

But will what you and I think have any impact on whether the Fed raises rates or not?

No.

Will members of the FOMC have an impact on what the Fed decides?

Yes, absolutely.

Do you know what FOMC insiders think about interest rates?

I guess not.

So today, in one simple chart, I will show you what the members of the FOMC think about interest rates and their trajectory over the next few years.

The FOMC is comprised of Federal Reserve chairman Janet Yellen, Federal Reserve board members, and the Federal Reserve bank presidents.

Appropriate pace of policy firming: Midpoint of target range or target level for the federal funds rate

Each blue dot in the above chart represents one FOMC participant and their individual interest rate targets for the end of upcoming calendar years and over the longer term. The Fed released this projection on 17 June 2015.

So out of the 17 FOMC participants, 15 think that it may be appropriate to hike rates by the end of the year 2015. Two participants disagree and believe rates should remain unchanged.

Now hold on for a second before you run to your broker and sell all your shares thinking that the FOMC will raise rates and send global financial markets for a toss.

This is just the FOMC participants' projections based on the data available till June 17 2015. And we all know how quickly the data can change quickly.

The Fed looks at three key economic parameters to decide its monetary policy: the unemployment rate, changes in real GDP, and inflation rates.

Over the last one year, the unemployment rate has shown remarkable improvement. The August jobs report showed a 5.1% unemployment rate-very close to the Fed's target of 5%.

The other two forecast targets are GDP growth of 2.5% and inflation at 2%. The average GDP growth rate for the first three quarters is just higher than 2%. Inflation is languishing around 1%. So here we have a mixed bag and the reason for all the debate and anticipation about what the Fed will do.

But looking at the above chart, it seems that a rate hike could come sooner rather than later. If not in September, then probably in October or December.

Do you think US Fed will hike interest rates in September? Share your views in the Club or share your comments here.

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6 Responses to "Insiders Activity of the Fed"
VK AGARWAL
12 Sep, 2015
No, I do not think that there is room and logic to increase the Fed Rate at this juncture of world-wide turmoil. May be a increase of 25bps is possible in December this year if china shows some firm positive indicators.Like 
narendra molparia
12 Sep, 2015
All central banks fear deflation the most when it is a choice between moderate inflation and deflation. Fed is no exception. Deflation will add to sovereign debt where as moderate inflation will allow increased tax revenues and a positive impact on debt servicing. Even a small hike in rates in present context will accentuate deflationary expectations. If this results into a feedback loop of its own we should be prepared for catastrophic consequences. However Americans have scant regards for others.Given there inflated ego the FMOC members can still go ahead with there plans. In that event they have no option but to assuage the Wall Street with a firm full stop on further rate hikes for a while. Otherwise there will be a free fall every where. Like 
anup kumar dutta
12 Sep, 2015
iNTEREST RATE HIKE CAN NOT BE COSIDER IMMEDIATELY AS THE US ECONOMY NEED TO BOOST UP BY THE INDUSTRIAL GROWTHLike 
soumitra chatterjee
12 Sep, 2015
As per my anticipation the FED will hike the Int Rate for 25 BPS from 1st January 2016. They could be announce this on 17 th September. Market may go down by this news. But I guess the market will stat to go high from 21st September, after absorbing primary shock.Like 
Haresh Haswani
12 Sep, 2015
Lowering or increasing the interest rates where they are higher can make a change in the economy. What effect would this have in a country where it is already near zero? Like 
VIJAYARAMAN AKILESWARAN
12 Sep, 2015
My thinking is that UD FED will NOT hike interest rate on 17th September as the inflation is languishing around 1%Like 
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