Will the Feds’ hike, is the question just about all analyst’s and traders are asking.
There has been nothing but talk about hiking rates in the US for over 9 months now which is creating a lot of uncertainty in the markets. Janet Yellen the Fed’s chair spoke in a hawkish tone a little over a week ago which sparked some dollar rallying. Some analysts commented that the current dollar rally has nothing to do with a rate hike but traders dumping risk currencies or taking long awaited profits on the comdoll rallies we have seen in recent months.
In extreme circumstances will call for extreme measures. In the height of the GFC the US Federal reserve cut interest rates right down to almost zero which is what any central banks will do. The GCF was almost 10 years ago and still normalization of monetary policy has only been talked about, and quoted quite often by Fed members ‘Is low policy the new norm?”.
Whether its the “new norm” or not, at current US economic conditions are far from a crisis and holding interest rates at ultra low levels could be more damaging than hiking. This could be the reason why the rest of the developed economies are still in need of cutting rates.
Are the Feds behind the eight ball?
Economies run in cycles and while the US economy is not running hot its not in recession either, as most of the world economies are running at low levels and flat lined over the last decade it may well be the new norm and the current US economic conditions may be the new “hot” level. If so what will happen on the next decline and next interest rate cutting phase. Will the Feds have any scope to cut if the current rates are left at already low levels?
The fact is the US economy is no longer in crises and there for not necessary to leave rates at crises levels. The rest of the world is waiting for them and can only wait so long.
What is the next excuse?
The Federal Reserve for months on end have been making excuse after excuse and excuses are running out. Before the next meeting the US has core retail sales and core CPI some green numbers here and what will the feds have to say this time round?