Since the financial crisis nearly destroyed the global financial system and plunged us into a depression the US Federal Reserve has moved heaven and earth to provide liquidity, ie “New Money” to the US economy.
QE1: Nov 2008 through March 2010: Fed buys $1.35 trillion of US Treasuries and Mortgage Loans
QE2: Nov 2010 through June 2011: Fed buys $600 billion of long-term US Treasuries
Operation Twist: Fed sells $400 billion worth of US 3 month to 3 year US Treasuries and buys $400 billion of 5-30 year US Treasuries
QE3: September 2012 through October 2014: Fed buys $1 trillion in Mortgage loans.
That’s a total of $2.95 trillion of freshly printed money the Fed injected into the US financial system, which combined with interest rates spending almost 7 years at 0% to 0.25% helped to create the lowest borrowing costs in the history of Corporate America.
Now the Fed is wanting to normalize rates, meaning raise them higher to provide some dry powder for when the next US downturn hits so the Fed can hopefully avoid following the lead of European, and Japanese Central Banks into their dangerous experiment in negative interest rates. The first hike came on Dec 16, 2015, and was quickly followed by the markets first 10% correction in over three years.
Since that time weakening US economic growth, continued global weakness, low oil prices (keeping inflation pressure low), concerns over China’s mountain of unstable, and poor quality debt, and of course Brexit, have lead to no more rate hikes, despite the Fed’s initial projection that we would see 4 increases in 2016.
Which brings us to today. There are 2 more Fed meetings this year, Nov 2, and Dec 14. The financial market’s currently place the probability of rate hikes at these meetings at: