21 September, AtoZForex.com, Lagos – After the central bank failed to raise rates last week, there has been a string of opinions regarding this decision, with many economists criticise Yellen’s speech. The Fed’s method of communication is a real issue, said Frederic Mishkin, a former governor and current Colombia university professor of Economics on Friday.
Explaining his opinion, Frederic said on the CNBC that: “The key is clarity, if you’re going to do something, say what you’re going to do and actually mean it“. Mishkin’s underlying concern is with the dovish statement that suggests no hike in September, as Yellen clarified that this year is still likely.”And I think that’s inconsistent with the message that is in the statement, and that inconsistency is creating uncertainty and that could hurt the economy” he said. Adding that if they did not move in this meeting, then there is a thin chance they will in any of the other meetings this year.
China is not the excuse
Also, Citi’s head of North America economy, Willian Lee said on Friday that he does not believe the Fed actually held back due to issues lurking around the world’s second largest economy (China), saying it had nothing to do with the decision to hold rates.
“I don’t believe China is the excuse, I think it’s the cover-up,he said on squawk Alley. “I think there is another reason behind it and maybe we will find out what the reaction function will be. Probably the committee members have little or no confidence in inflation targets, said Lee.
Investors should avoid risks for now
Dan Suzuki of Bank of America Merrill lynch feels nonetheless, investors will avoid risk for now, till the true intention of the Fed is clear enough: “There’s a lot of concern in what the shift in monetary policy is going to do, and what the impact of rising rates is going to be on emerging markets, on currencies and commodities. But the main implication of that is that investors don’t want to take on a lot of risk ahead of that change in policy”.
Many experts seem to opine that this year remains an unlikely possibility for hikes to commence following the last dovish statement from Yellen. It also remains to be considered whether the Fed is simply following the advice of bodies like the IMF and world bank, to wait till next year before hiking rates.
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