While the US dollar is making its historic gains in-line with last week’s better than expected NFP figures San Francisco Federal Reserve President John Williams expects a rate hike for December.
“Assuming the data are consistent with those (conditions), I think there’s a very strong case for starting the process of raising interest rates. The next natural step is to start raising rates and to do that gradually.”
It’s been 10 years that the Fed has not hiked interest rates and since 2008 they have kept on lowering the interest rates to almost zero zone in an attempt to accelerate and encourage spending.
Traders should watch William
There has been too much noise in the market regarding the Fed’s rate hike expectations, however one main reason for traders to be careful about William’s rate projections is the fact that he is a voting Fed member. Additionally Mr. William’s views often align with Janet Yellen’s views. He was also Yellen’s research director when she headed the San Francisco Fed.
December Rate Hike Live Possibility
The Janet Yellen also told the Congress last week that a rate hike in December rate hike is a “live possibility,” depending on economic reports in coming weeks.
In September, the Fed held off on its rate hike due to the Chinese economic slowdown and concerns about ripple effects on other countries in the region, emerging markets and even the US economy. But, Williams said, “Those risks have not materialized.”
At the moment many analysts including the Fed’s voting committee members are expecting to see a rate hike for December or for early 2016.
Labour data is the main supportive fundamental data for the Rate Hike expectations, however many analysts including myself expect not to see a rate hike due to lower than expected inflation data. Inflation is expected to be disappointing as long as the Oil prices are below $50 per barrel zone. Lower oil prices are also in-line with stronger USD as well.