22nd September 2016

On 21 September the US Federal Reserve decided not to raise interest rates, but fourteen of the seventeen board members indicated that they expected one more rate rise in 2016. This has pretty much telegraphed to financial markets that, so long as economic statistics remain reasonable, the Fed will go for a rate rise at its December meeting.

This December is an excellent time for a rate rise, regardless of the state of the US economy, because it is a period of low public scrutiny. It has the advantage of being after November’s Presidential election but before the inauguration of the new President on 20 January 2017. Hence a rate rise at this time is much less controversial: the Fed is unlikely to attract criticism from either the lame-duck incumbent or his not-yet-installed replacement… [see more]