Will Fed raise interest rate in Dec 2015

Take the poll...

 

In my view no change in interest rate this time

governor Guidance is more important

 

Ok.... Thanks

Keep it coming guys. Ofcourse with your reasoning like how RMSC did

 

Report by Karvy on the subject:

US Fed Meet: Increased probability for a rate hike in December 2015 or early 2016

The US Federal Reserve has maintained status quo on the Federal Funds Rate
target range of 0-0.25%. The Federal Open Market Committee (FOMC) is also
continuing its policy of re-investments to maintain accommodative financial
conditions. The Fed highlighted that the economy is growing at a moderate pace.
The Fed’s main objectives are maximum employment and 2% inflation rate. The
Fed in its rate decisions takes into consideration labour market conditions, inflation
as well as inflation expectations and international developments. The recent labour
market indicators are pointing towards a slight slowdown in growth with conditions
showing improvements with only around 142,000 job gains in September 2015
(mainly in the health care sector (+34,000) while losses were reported to continue
in mining (-10,000); the average job gains this year including recent data have been
around 198,000 which is lesser than the 2014 average of 264,000). However, the
unemployment rate remained steady at 5.1% in September 2015. The inflation
rate (-0.2% in September 2015) is still below the long-run 2% target. The Fed has
indicated that the inflation rate may remain lower than the target in the near future.
The Fed has stated that the inflation rate will gradually rise towards its target rate
and the possibility of a rate hike will increase when it is confident that inflation is
moving towards 2%. The Fed does not seem too anxious about the recent global
economic turbulence affecting the US economy but did state that the conditions
will be monitored. Progress in domestic economic developments will be keenly
watched and will play an important role in any future funds rate decisions.

Our View

US economy is ready for a rate hike during the year 2015, but the timing of the
rate decision will be very much dependent on the upcoming employment and
inflation numbers before the December 15-16 meeting. Though the probability of
a December rate hike has increased slightly, we are of the opinion that Fed could
initiate rate hikes in early 2016 considering the recent global developments.

 

Rate increase is due, very shortly, but MORE RELEVRNT QUESTION FOR US IS-WETHER MARKET HAS FACTORED IN THIS DEVELOPMENT? ALMOST , YES (my opinion) as news is floating in the air for quite some time.It is also believed that market may be irrational(nervous) in short term but in the long term it is rational and knows that rate hike is inevitable.

 

Good point. If rate hike is priced in why worry?

 

Historically the Fed has raised rates when over 50% of analysts have factored a raise in. As per latest data, 45 % of American analysts are saying it will in Dec 15. It is touch and go but I think it will not in Dec 15. I was I the camp which believed they would raise rates in Sept. When they did not I realised they are more weak kneed than I imagined they were.

The data which is key is inflation and expectations of inflation. Inflation data is weak and growth outlook so fragile that inflationary expectations are low as well.

Finally, the employment data is dressed. In the sense, it is calculated as those unemployed who are registered with employment agencies and are looking for a job. From this pool the calculation denominator is arrived at.

Actually, the pool is much larger and does not include those who have " lost hope" and not registered at all.

There are enough reports to suggest that this number is meaningfully high and if it were included, employment numbers will look a lot less rosy.

Finally, a rate hike is inevitable and we need to be prepared to take advantage of short term risk mispricing we are likely to witness when this happens

 

Hi,

I would humbly submit that just because the news has been lingeringfor sometime doesnt mean that the market had priced this in. Around September - fixed income market had priced in only a 30% probability

 

Federal Reserve Chair Janet Yellen said Wednesday that December would be a "live possibility" for a rate hike if the upcoming data are supportive.
"Now no decision has been made on that and, what it will depend on, is the [Federal Open Market Committee's] assessment at the time. That assessment will be informed by all of the data that we collect between now and then," she said, testifying before the House Financial Services Committee.
Janet Yellen also said she and the committee expect the economy to grow "at a pace that's sufficient to generate further improvement in the labor market, and to return inflation to our 2 percent target."
"If the incoming information supports that expectation, then or statement indicates that December would be a live possibility," she said.
According to the CME Group, the probability of a Fed rate hike next month increased to about 60 percent after Yellen's testimony.

 

You are absolutely right. No matter how long it has been lingering in the air, when it happens there will be at least a short term shock. Expect the high multiple shares and the ones which have increased a lot in the last few months to take a knock. It is the right time to make a shopping list and wait, given that Q2 results have been a bit of a dampener and if the BJP loses Bihar ( as people are sensing it might ) then the mood will already be fragile and this hike will add to it.

 

Sir,I understand my views are being misunderstood

I still hold the view that fed hike will not make much difference in the long term and our market will move on its own strength as maket is already factoring in the rate hike and when that occures, there wll be no surprise element left,which shakes the market.

 

I agree that in the long run there may not be an impact; to the extent that market is not going to be caught unaware by the rate hike, the impact will be mitigated in the short run as well.