The risk faced by the European Central Bank is very different from that of the Fed, and ECB president Mario Draghi is likely to ease monetary policy further with additional quantitative easing. Almost a decade has passed since the U.S. Central Bank has raised its benchmark Federal Funds Rate. It does, however, indicate that the bond market is positioning for higher rates.
Restoring some clarity about the Fed’s intentions will not be easy given how wide apart economists and investors are right now. Fed officials have been mixed in their comments, and market strategists have been all over the map about what they think is best.
Oil prices rose in Asia Wednesday but trading was subdued as the market awaits a Fed decision on interest rates and stockpiles data from the United States.
Chris Bertelsen, the chief investor officer of Global Financial Private Capital in Florida, have argued that although the country’s weak economy could be regulated in more than one ways, investors continue keeping an eye on China for a bottom in regard to the country.
Markets have since calmed somewhat but remain on edge.
“Only in extreme circumstances should the Fed react to markets”.
And so the recent move in the 2-year does not imply that traders expect the Fed to lift rates this Thursday. “An advantage to beginning a little bit earlier is that we might have a more gradual path”, she said. The reigning bond king, DoubleLine Capital’s Jeffrey Gundlach, invoked The Rocky Horror Picture Show when he said recently, “Dammit Janet, don’t raise rates”, while pointing to a host of reasons for waiting-slowing China, crashing commodities, scant inflation, to name just a few. The Fed will unveil its current reading on the economy, interest rates, inflation and job market Thursday morning. But even as the world’s largest economy kept outperforming its peers, there has often been something to give policymakers pause. This implies a rate hike in 2015 is off the table.
Paul Hickey, managing partner of the Bespoke Investment Group, said their policy was, “one hike means another hike at the next meeting, and another hike at the next meeting, and another hike at the next meeting“.