US Interest rate rise postponed?
A major high street bank has today released a statement containing their assessment of when there will be a likely US raise in interest rates. Until recently, the consensus was that the States would look to raise their interest rates in September of this year. This was due to the fact that they have had stronger economic data and conditions during the last six months and their price pressure and jobs data et cetera lined up to produce conditions that had analysts thinking this would be a move in the short term.
However, some interesting analysis has come from the UK’s largest bank which discusses a number of facets of the move and provides a forecast outcome suggesting they have pushed their own forecast date back to March 2016. The outlook highlights deteriorating market conditions for the US economy during the last few weeks with these gathering pace in the last several days. Much of the analysis focusses on global impacts and the associated stresses that crumbling bond and equity markets would put on their economy – moving them into stress territory that would make any interest rate move unsuitable for next month.
It goes on to say that the Federal Open Market Committee may look to delay the start of any raises to beyond September in order to fully assess and appreciate the impacts and causes of the recent volatility in the financial markets. Dollar strength affecting global demand for US products and lowering oil prices both mean that demand for American supplies could weaken. This means difficulty in putting pressure on inflation – a core factor in setting interest rates.
Today we watch for a range of US economic data releases including housing data and services Purchasing Managers Index, which could help reveal some clues about future demand outlook in the States. If other analysts begin to feel the same way about the potential rate rise date, we may very well see a rapid short term sell off of USD.