The Federal Reserve Should Raise Interest Rates Today, but It Won't for One Fundamental Reason
Hard economic data, not proactive guesswork, drive Federal Open Market Committee (FOMC) policy decisions.
Overview
Today is a pivotal day for Wall Street's major stock indexes, the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC), as well as consumers. Mere hours from now, the 12 voting members of the Federal Open Market Committee (FOMC) will render their verdict on interest rates.
Although the probability of the Fed raising the federal funds target rate on July 29 has effectively tripled over the last week from 12.8% to 37.9%, according to the CME Group's FedWatch Tool, it's unlikely that policymakers will increase interest rates. This prediction of inaction boils down to one fundamental factor that governs the FOMC: it's a reactive, not proactive, body.
Fed Chair Kevin Warsh and the FOMC will announce their interest rate decision at 2 p.m. ET on July 29. Image source: Official Federal Reserve Photo.
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Originally published at www.fool.com.