If there is one treat Francis really likes it is popsicles. This summer, from dealing with the heat, to playing in the pool or even an after-dinner dessert, Francis wants a popsicle. When it comes to the flavor of popsicles, it really does not matter whether it is a cherry, orange or even a bullet pop, Francis likes them all. If it were not for Katie or me, he would continue to eat popsicles all day long with not a worry about the repercussions. As we all know, if he ate popsicles all day, he would not only have a horrible stomachache, but he would also be jumping off the walls due to all the sugar. Therefore, Katie and I know that we must limit him to one maybe two popsicles a day.
This Photo by Unkown Author is licensed under CC BY-NC-ND
What do popsicles have to do with this past week? Well, the Federal Reserve completed its two-day policy meeting on Wednesday. The Federal Reserve (Fed) is the central Bank of the United States and provides the nation with a safe, flexible, and stable monetary and financial system as defined by the Federal Reserve website. Looked at another way, Katie and I are the Fed to Francis. The Fed is the parent of the monetary system. While Katie and I want to raise a kind, hard working little boy, the Fed’s goal is to achieve stable prices (control inflation) and maximum sustainable employment (low unemployment). The Fed achieve this, by adjusting the federal funds rate and when needed provide additional liquidity to the economy. The federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight on an uncollateralized basis.
Due to COVID-19, the Fed early on slashed the federal funds rate to near 0% and said they would be very accommodating both with interest rates and providing liquidity to the economy through lending billions of dollars. While it will take years to see how helpful the Fed’s actions have been, we can see how different and swift their reaction was as compared to 2008-2009 recession.
Why do I bring up the Fed? Well this past week we saw the Federal Reserve having their last meeting before the 2020 Election. While there were no changes to the federal funds rate, the economy and markets were looking to the Fed’s guidance about the future of rates. The Fed tried to appease the markets by saying they did not foresee any increase in interest rates for the next three years, however following the meeting we did see some volatility in the equity markets. Very simply, this could have been the markets way of saying “thank you for the popsicle, now may I have another”. Due to the unknown of the overall economy, the markets potentially want to see more help from the Fed, but the Fed is still waiting for additional information.
Recently, we have been talking with clients about their various forms of debt which can include mortgages, student loans and credit cards to name a few. Through discussions with our network of professionals, if you have an interest rate of 4% or higher on your current mortgage, we should talk. While there are many variables to review, there could be the potential of savings hundreds of dollars per month. Please give us call to discuss and before calling please have information about your current rate, remaining balance and how many years left with the current mortgage.
As a reminder, we will be hosting two webinars in October entitled “Election 2020: The Economy; Markets and You” on October 8 and October 29. Please look for future emails with additional details and to RSVP.
Have a wonderful weekend and think about rewarding yourself with a popsicle.
Chris Zeches, CFP®