After months of speculation, investors around the world let out a big sigh of relief when Fed Chairman Janet Yellen did not raise interest rates. Investors like Brian Bonar knew that an interest rate hike at this point in time would exacerbate the financial issues investors are facing around the world. Bonar has a lot of experience in the investment industry as well as other industries. He spent 17 years at IBM Europe, and he is currently the CEO of Dalrada Financial Corporation. Dalrada and Bonar have developed a comprehensive program that helps companies manage their employee benefits and investments. An interest rate hike would have been a game-changer in terms of investment earnings.
Bonar and other executives in the investment industry are happy with the near-zero interest rates, but they are not that happy with Yellen. Yellen’s communication skills leave a lot of to be desired since no one had heard a word from her in the two months before she made the announcement about the Feds decision. Investors like Bonar would like to know how the Feds plan to lift rates off the floor going forward, and how effective they will be at communicating an increase when they think one is necessary. Even though more than half of the economists and investors like Bonar didn’t think the Feds would raise the rates, they did think they would have gotten some sign from the Feds before they made the announcement. In the investment world, signs of pending changes that impact investments are important tools that help investors make the necessary adjustments.
What the Feds did this time, according to Mr. Bonar, is give conflicting information to the public. Two Fed representatives told the public different things, and that was confusing. Yellen defended them by saying uncertainty is natural in financial markets especially when a policy shift is eminent. Yellen also said the Feds will only raise rates when inflation hits its 2 percent target. Inflation is reaching that percentage, so Bonar thinks a rate increase will come shortly. Mr. Bonar thinks the Feds were cautious going into their meeting for a reason. They could have been clearer about their intentions because the market was already adjusting to a quarter of a percent increase. The fact that they decided not to raise the rate is a clear sign that China issues and other emerging market issues impacted their final decision.
Yellen is a student of the data-dependent mentality when it comes to policy changes, according to Bonar, and that won’t change. Investors would be wise to interrupt the data the way Yellen does if they want to know when and how much the interest rate will change going forward.