Analyst sees over 50 per cent chance of US rate hikes in December and January
An analyst says the US Federal Reserve has over 50 per cent chance of raising interest rates in December and January due to Middle East uncertainty. Fed Chair Walsh plans to reduce rate-vote meetings from next autumn, which the analyst says could give the Fed more policy flexibility.
The US Federal Reserve has left interest rates unchanged as expected, but an analyst says the chances of a rate increase in December and January are above 50 per cent.
Luk Ting-lung, chief executive of Hongtu Asset Management, said the Middle East situation may not change after the November midterm elections, leaving markets uncertain and affecting inflation. He believes the probability of the Fed raising rates in December and January is higher than 50 per cent.
In a separate development, Fed Chair Jerome Walsh announced that from next autumn the Federal Open Market Committee meeting schedule will be adjusted, reducing the number of rate-vote meetings.
Luk noted that the Fed previously aimed for maximum transparency to ease market concerns, but Walsh has changed that approach by speaking less to the market and not forecasting the US economy. Luk said this could give the Fed more room for manoeuvre in monetary policy, and reducing the number of voting meetings could make each disclosure more concrete. He does not believe the Fed's policy direction will become unpredictable, as the central bank will still release economic data.