Why the US Federal Reserve should not raise interest rates
Markets are pricing in an increase this week — but there are good reasons the Fed would be wiser to hold off, writes Adriaan Pask
Although markets have started pricing in a December rate hike by the US Federal Reserve, PSG Wealth believes there is a strong argument to be made that they should not. Markets took their cue from Fed chair Janet Yellen’s testimony before Congress on November 17, where she hinted at a hike. She said the election of Donald Trump to become US president did nothing to change the Fed’s plans for a rate increase "relatively soon". The Fed’s own predictions are that 10 out of the 17 federal open market committee (FOMC) members, who will determine whether or not to change interest rates, believe a rate hike of 25 basis points should take place in 2016. Four members believe it should be a larger increase, while only three of the members believe the rate will stay where it is. Against this background, and seeing as the Fed has not raised rates this year, many believe December is the appropriate time. Data on the strength of the US economy, the strength of the labour force and inflation are s...
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