If FED Raises Rates Then ?
The Fed faces conditions that aren’t exactly ideal as it heads into its potentially history-making rate decision today. If the FED does hike rates tonight then it will be a matter of time before US and the world is headed for a total collapse in the next 30 months. Due to astro cycles it will not happen before March of 2017 but post March of 2017 we will see the mother of all bear markets which will decimate all asset classes and due to the prevailing food inflation levels then (which will be at least 100 percent higher than today world vide not only in India) We will see many social and political problems.
While there’s never an ideal scenario for a rate hike, the conditions the U.S. central bank face are onerous. Declining oil prices are putting pressure on a number of fronts, not the least of which is a default scare in the junk bond market; corporate profits and manufacturing are at recessionary levels; and the economy is closing out another unspectacular year.
Moreover, things don’t look any better on the international front. Emerging markets are really struggling on the economic front and their currencies be it South African Rand, Mexican Peso, Real, Rupee, Rubble and many currencies are losing value against the dollar. Which means the world will be exporting its deflation to the US and I don’t think so FED wants that to happen.
Euro Zone is struggling and the most of the Central Banks worldwide are taking the opposite approach, loosening rather than tightening monetary policy in an effort to promote growth.
Nevertheless, Global Stock Markets have been preparing for a quarter-point rate hike on Wednesday 16th Dec 2015 that is seven years in the making.
On the hawkish side — or those who want to raise rates — will be a consistently improving jobs picture, albeit one that includes mediocre wage growth.
Unemployment rate in the US has fallen to 5.0 percent and is expected to decline into the 4 percent range through 2016. However, the drop in the headline rate is in part a function of a labor force participation rate hovering around its lowest level. The actual rate of unemployment when factoring in those who have stopped looking for work or are underemployed is 9.9 percent.
On the inflation side, there also is scant impetus for a rate hike. The core personal consumption expenditures index that Yellen follows showed just a 1.3 percent annualized gain in its most recent reading and is expected to either hold steady or perhaps decline into the end of the year.
More broadly, economic growth has remained muted or worse. The most recent reading of the ISM manufacturing index indicated contraction in the sector, while GDP growth for the fourth quarter is expected to run at a 1.9 percent rate, according to the Atlanta Fed. Market data provider TrimTabs said its running gauge of economic conditions is at lowest level since mid-March.
What all the data points are likely to add up to is a Fed providing what many on Wall Street are terming a “dovish hike,” or an increase that will be accompanied by certain language that the Fed will tread carefully in 2016.
However, what may in the end be the main driver of Fed policy is simple market expectations, with CME traders pricing in an 83 percent chance of a rate hike. The Fed backed off on a much-expected September rise at a time when traders lodged very low expectations for a hike, despite similar economic conditions to what is transpiring as the year comes to a close.
Yes, the market always climbs a wall of worry, and U.S. equities feel oversold at current levels. The point here is not that the end of the world is nigh as much as the world is getting incrementally complex in ways that don’t get a lot of attention,” Colas said. “All that is an argument for further volatility not just into holiday 2015 but well into the new year.
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