Knowledge Center

The Wilshire Advisor Solutions Knowledge Center contains our video presentations, white papers, monthly and quarterly market commentaries, and product literature.

MORE IN THIS CATEGORY: Market Commentary, Commentary
25 Latest Articles

September Rate Hike Remains Uncertain

The Fed Five-Year Forward Breakeven Rate, which uses Treasury Inflation Protected Securities (TIPS) to calculate implied inflation expectations of investors and represents a notable measure of inflation for the Federal Reserve, recently slid back below the Fed’s Target Inflation Rate of 2% (Exhibit 1).

Exhibit 1: Fed Inflation Gauge Slides Below Target Rate

The recent devaluing of the Chinese yuan appears to have impacted inflation expectations to the downside, likely due to heightened concerns regarding global economic growth. The decline in Energy prices, as reperesented by WTI Crude Futures also appears to have impacted inflation expectations to the downside. The recent decline in WTI Crude Futures (Exhibit 2) is observably correlated with the recent decline in the Breakeven Inflation Rate shown in Exhibit 1.

Exhibit 2: WTI Crude Futures Price

Despite such significant declines in implied inflation expectations, the most recent implied probability of a September rate hike based on Fed fund’s futures trading is 46% (Exhibit 3), down from a high of 54% prior to the devaluing of the Chinese yuan, and off the lows of nearly 20% in early July. Given the backdrop of mixed economic and inflation indicators, a September rate hike remains uncertain. Although exogenous factors, such as geopolitical risks and foreign central bank intervention may have an impact on the Fed’s interest rate strategy, the outcome is most likely data dependent. With the September Fed meeting only one month away, all eyes will be on the Consumer Price Index (CPI) released today, and the Non-Farm Payrolls number in early September, among other measures of the economy.

Exhibit 3: Implied Probability of September Rate Hike


Wilshire Funds Management is a business unit of Wilshire Associates Incorporated (“Wilshire®”).

This material contains confidential and proprietary information of Wilshire. It may not be modified, sold or otherwise provided, in whole or in part, to any other person or entity without prior written permission from Wilshire Funds Management.

This material is intended for informational purposes only and should not be construed as legal, accounting, tax, investment, or other professional advice. Past performance does not guarantee future returns. This material may include estimates, projections and other “forward-looking statements.” Due to numerous factors, actual events may differ substantially from those presented.

This material represents the current opinion of Wilshire based on sources believed to be reliable. Wilshire assumes no duty to update any such opinions. Wilshire gives no representations or warranties as to the accuracy of such information, and accepts no responsibility or liability (including for indirect, consequential or incidental damages) for any error, omission or inaccuracy in such information and for results obtained from its use. Information and opinions are as of the date indicated, and are subject to change without notice.

Wilshire is a registered service mark of Wilshire Associates Incorporated, Santa Monica, California. All other trade names, trademarks, and/or service marks are the property of their respective holders.

Copyright© 2015 Wilshire Associates Incorporated. All rights reserved.

150817 E1015

MORE IN THIS CATEGORY: Market Commentary, Commentary

Recent Articles
Recent Articles
Recent Articles

Registration Now Open

 2017 Year in Review & 2018 Outlook Webinar

Thursday, January 18, 2018
Presented by Josh Emanuel, CIO, Wilshire Funds Management.