Brexit, Millennial Credit Concerns, Fed Funds Rate

June 13, 2016

Monday – June 13

The two-day Federal Open Market Committee meeting kicks off tomorrow and will end on Wednesday with the monetary policy statement being released at 2:00 p.m. ET. There is almost a zero percent chance of a hike to the Fed Funds Rate at this meeting after the weak May Jobs Report. In addition, the Brexit referendum later this month and the midst of negative Bond yields around the globe are holding Fed members back from raising interest rates. Traders don’t see at least even odds for a rate increase before February. The Fed Funds Rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight, on an uncollateralized basis.

The millennial generation has been a hot topic as far as the housing sector is concerned. The big question is when the generation will begin to purchase their first homes. There have been a few hurdles for millennials to overcome, such as a lack of inventory and rising prices. A third hurdle has now appeared … weak credit scores. A recent survey by credit scoring company TransUnion found that 33% of millennials, aged 18 to 34, want to purchase homes in the next year, but 43% of them have subprime credit scores. The study went on to say that 30% of this age group have credit scores between 300 and 600.

The financial world has been abuzz about the “Brexit” topic, which has put global Stock markets on edge. Brexit refers to the possibility that Britain will withdraw from the European Union. A referendum is being held on June 23 and will be voted up by British, Irish and Commonwealth citizens over 18 who are residents in the United Kingdom. A referendum is basically a vote in which everyone (or nearly everyone) of voting age can take part, normally giving a “Yes” or “No” answer to a question. Whichever side gets more than half of all votes cast is considered to have won.