Commentary

The Curious Case Of FED Interest Rates !

fred graph

There has been wide spread speculation of when will fed raise interest rates ? Equities have been gyrating wildly with any hint of whether fed will raise it this month or hold it for the next meeting. Analysts have been tearing their hair off in trying to predict the timing of fed rate hike. Today we had Chinese industrial data which came in 6.3%, expected was 6.1% .Also Retail sales came in at 10.6% expected was 10.3%.Fixed asset investment has been 8.1% slightly better than expected. What does this imply? How can it impact Fed interest rates ?

If we go back a little and consider last year’s end than we can probably try to sum it up.Last December in 2015 fed increased the interest rates by .25% basis points.There was expectations of a rate hike in early 2016 but that was not to be ! Data coming out of U.S was very good set of numbers and it was a question of when and not whether Fed will raise interest rates. The reason given by Fed chairperson was world economy is struggling and any interest rate hike could derail the progress expected in the world economy. Now if we consider current situation U.S data has been erratic but generally satisfactory.Also energy prices has made a smart recovery increasing inflation and due to continuous fall in unemployment the purchasing power has increased.Now if we see emerging economies than it seems that the worst days are behind and economy seems to be stabilizing at current growth rate.Europe also seems to be getting out of a prolonged slumber ! The biggest concern has been that of security rather than economy with spate of bomb blasts in the past year or so !

We will certainly wait for the conclusion of this meeting as this has effected the market movements and more importantly the press meet where they can possibly guide us about the timing of Fed rate hike.!

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