What's going on?

We�ve all heard the story about the boy who cried wolf. Well, officials from the US Federal Reserve (�the Fed�), once again, seem to be talking up the likelihood of raising interest rates � but investors aren�t really buying it.

What does this mean?

On Tuesday, the vice-chairman of the Fed suggested investors were underestimating the chances of an interest rate increase in September. On Wednesday, notes from the most recent Fed meeting were released: they (arguably) appeared to be more supportive of an interest rate rise than the meeting�s official statement.


In previous months (like in May), such news would likely have caused markets to reflect a significantly higher likelihood of an interest rate increase (e.g., the US dollar would go up in value � click here for an explanation). But on Tuesday, markets only moved moderately in favor of an increase, and on Wednesday they moved in the opposite direction (e.g. the dollar went down after the meeting notes were released). The point is that investors are skeptical of the Fed�s commentary � at least for now.

Why should I care?

For markets: Discord at the Fed has typically led to no action.
There appears to be a fair amount of disagreement amongst members of the Fed�s interest rate committee. Under its current leadership, the Fed has tended to err on the side of caution (i.e. not raise interest rates) – so perhaps investors are betting on more of the same. We should learn more when the Fed Chair, Janet Yellen, gives a major speech next week.


For you personally: You can be excused for wondering if this really matters�

If interest rates go up, things like mortgages and other loans will get more expensive. It could also be a tougher environment for investments like stocks and bonds. So, yeah, ultimately interest rates are important. What seems far less important is all the chatter that goes on between Fed meetings – and, as evidenced by the relative lack of moves in the market, investors seem to agree.