Keep Calm and Carry On

I believe that the intended message from the Federal Reserve’s announcement on Wednesday was for investors to Keep Calm and Carry on.  The Fed has hope that the continued increase in Asset Prices will bolster economic growth.  Domestic growth is slowly increasing and as the economy grows the Fed would like to see a moderate increase in inflation.  If Inflation increases too rapidly the Fed may have to change course and begin raising rates.

 

Commodity prices are a very good indicator of global growth and can be a good measure of inflationary pressure.  A look at the chart below shows that commodity prices have actually been going down which is the opposite of what the Fed would like to see.  This scenario allows for the Fed to hold rates lower for a longer period of time in the hopes that the stimulus will continue to help the economy grow.

The message I think the Fed wanted to send was that they have more time and that they would like for the markets to “Keep Calm and Carry On”.