Oil Up. Gold Up. The Fed is Watching!
A: With Crude Oil trading at 3 1/2 Month highs and Gold trading at near high levels of $554 per ounce, these inflation leading indicators are sure to be on the Fed's radar for the upcoming meeting.
Remember: The primary job of The Fed is to control monetary policy and maintain a stable economy and payments system while warding off the potential threats to our national economy: such as inflation, natural disasters, scandals, un-natural disasters, political, etc..
As the price of energy and gold continue to rise, the fed is more and more likely to take a cautionary stance in raising rates one last time! While general consensus right now is for 1 more 1/4 point rate hike and then a pause, if the prices of gold and oil continue to bully higher the fed might be more inclined to pause sooner.
The fed is set to meet again on January 31st. If there is a surprise and they do NOT raise rates, then expect the housing market to get a nice little boost as rates will likely dip lower temporarily to reflect the new fed stance. Lower rates mean money is cheaper to borrow for potential homebuyers which means they can afford a higher asking price. Simple as pie.
My opinion: I still think we have 1 more 1/4 point rate hike in the bag for the next meeting. If oil and gold continue to rise by that time, I would expect a clear message from the fed that the end of the rate-hiking campaign is HERE, rather than is VERY CLOSE (which was mentioned in the last Fed minutes and is the current fed stance).
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