Fed Likely To Signal Rate Hike In December

Washington (Sept 21)  Federal Open Market Committee policymakers may well wrap up a two-day meeting todayday by signaling a rate hike in December, says optionsXpress. Analysts note the Federal funds futures are factoring in less than a 20% chance of a hike on Wednesday. “While on the surface it appears that the Fed is ready to start raising interest rates to begin to move towards a more ‘normalized’ interest-rate environment, mixed signals from both domestic and global economic indicators are causing Fed officials to remain overly cautious on implementing an actual rate increase,” optionsXpress says. “On top of the economic data, the Fed also has to be aware of the potential political implications of any action, especially with the hotly contested presidential election less than two months away….

So while a majority of the voting members may believe that the economy is sufficiently strong enough to absorb a rate hike now, it may be more politically expedient to wait until after the US elections in early November before actually raising rates. That being said, the Fed may ‘compromise’ with market participants by holding back on a rate hike in September but stating rather definitely that barring a major downward shift in the global economy that a rate hike is all but imminent in December.’

Source: KitcoNews