Will the recent rise in the price of oil and a much improved stock market influence the Fed at its upcoming FOMC meeting? Absolutely! The Fed’s itch to hike rates another 25 bps is likely to be scratched no later than their June 14-15 meeting. A string of positive news has caused the Fed to put further rate hikes back on the table as they have more credibility today than just a month back. However, the four quarter point hikes this year are not a high probability, even with higher oil prices, improved employment, and less fear of recession. Last month, oil prices plunged to a 13 year low of $26 a barrel, closed out this past week at $38.49 per barrel, and oil traders are suggesting a move above $50 per barrel in the near term. Higher energy prices will lessen the prospects for recession as evidenced by improvement in the U.S. import data. While the outlook in the U.S. is brighter, the problems in Europe, Japan, and China persist. Last week the ECB dropped their target rate to -0.40% and expanded their QE purchase program, China reignited fears of slowing global demand, and a sharp pullback in the price of Japanese bonds all contributed to market volatility. The UST 10 year note traded up, down, up, and down in a matter of 5 trading days with the yield up 10 bps for the week. Most economists agree that the Fed will raise rates at least once this year, but there is no agreement on where we will be at year’s end. The yield on our 10 year UST note is really cheap as compared to Germany@.27%, France@.62%, and Japan@-0.01%, thus it is hard to imagine foreign investors seeking yield opportunity away from America. Good argument for a flatter yield curve as longer rates remain low.