To Hike or Not to Hike Monthly Update
Presenting our monthly macroeconomic report co-authored by ETF Securities Research and Roubini Global Economics To Hike or Not to Hike
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To Hike or Not to Hike
This report provides an update to themes introduced in our Quarterly Outlook, published in June. Our focus this month is on policy divergence and the Fed’s ‘Lift-Off’.
The attention of investors is dominated by EM turbulence and speculation about the Federal Reserve’s tightening cycle. Our view on the most likely timing of the Fed’s first rate hike has moved from September to December. Given current turbulence and market volatility there is a risk of further delay into early 2016 but the speed and duration of hikes after the first rate rise in nine years is still more important than the initial lift off. Persistent disinflationary pressures have made a delay until December increasingly probable, while a slower-than-normal ”normalization” path after the first hike is a near certainty.
This is a key element of the theme of monetary policy divergence we established in January. The first hike and messaging will set the tone for the longer normalization cycle. The Fed seems likely to be followed in tightening by the Bank of England, even as other key central banks (in Europe and Japan) ease further.
What to watch this month: Fed policy meeting (September 17), to see whether Janet Yellen and co. take the plunge or delay until December, or even into 2016; in emerging markets, Brazil’s central bank meets (September 1-2) to decide if the 14.25% interest rate will be enough to quell inflation; in Mexico, we expect Banxico to parrot the U.S. with a hike to 3.25% on September 21, if the Fed surprises markets.
For more information contact:
ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E info@etfsecurities.com
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