The Federal Reserve increased short-term interest rates Dec. 16 for the
first time in nearly a decade. The action capped a year of uncertainty
about global asset markets. The possibility of a Fed rate hike had been
a key contributor to market volatility throughout 2015.
The Federal Reserve is almost certainly going to raise very short-term
interest rates for the first time in nearly a decade when it meets in
Washington next week. For us, as municipal bond investors focused on
income generation over the long term, this is good news.
Last Friday’s national jobs report triggered an instant recalculation of
the odds of a December interest rate hike by the Federal Reserve: Where
it had been roughly 70-30 against an increase, now it’s about 70-30 in
favor of one.