Taxable Money Market Commentary
by Senior Portfolio Manager Patricia Larkin
This is Patricia Larkin with a Money Market Commentary for March, 2015.
• Nonfarm payrolls surged by 295,000 in February and the unemployment rate dipped to 5.5% from 5.7% in January. This encouraging data is another sign that the U.S. economy has significant momentum as we near the end of the first quarter of the year. This is welcome news as it appears that concerns over the economic impact of the extremely harsh winter in much of the nation appear to have been overblown. And while the sharp downward move in energy prices is widely considered to be an overall positive for the economy, the effects of significant downward revisions to the energy industry’s capital spending plans on employment will be closely watched as we move through the year.
• Federal Reserve Chair Yellen testified to both houses of Congress and seemed to lay the groundwork for the Fed’s policy-making Open Market Committee to remove the “patient” language that has become a standard part of the policy statements. If that language is removed at the March 18 meeting, it would open the possibility of an upward move in the federal funds rate at the June meeting. Obviously, the Fed will react to incoming data, but each passing month of strong data increases the odds of the Fed finally beginning the process of normalizing short-term rates.
• While the Fed is contemplating higher rates, much of the rest of the world is facing lower to even negative interest rates. The European Central Bank (ECB) has begun its quantitative easing program in an attempt to boost Eurozone economic activity. The ECB is hampered, however, by underlying political stresses that raise uncertainty for both businesses and individuals in the affected countries. The potential for negative surprises on both the economic front as well as the continuing tensions with Russia lead us to continue to follow our long-held conservative credit policy while seeking to maintain appropriate levels of liquidity.
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The statements expressed in this commentary are those of the author as of the date of the article and do not necessarily represent the views its affiliates. The views expressed are subject to change rapidly as economic and market conditions dictate of Dreyfus or, and the statements in the commentary should not be construed as an offer to sell or a solicitation to buy any security. The commentary is provided as a general market overview and should not be considered investment advice or predictive of future market performance. Contact Dreyfus or your advisor for more current information.