Are rate hikes coming soon?
The folks at the federal reserve, including the head, Janet Yellen, would have you think so.
First, if a rate hike comes it will likely come in either September or December as those are the only two months that the federal reserve has scheduled press conferences. They have a meeting in October however there is no press conference scheduled for that time and quite frankly if you're going to be hiking rates you pretty much have to have a press conference.
After the recent turmoil in the markets, September could be too soon as the markets will not have had enough time to recover. December is also unlikely because liquidity tends to dry up at that time of year. According to some analysts, October could actually be the time to raise rates after-all.
Raising rates before December is increasingly likely, amidst the downturn in the recent bull-market. Why? Because of credibility. If the fed is going to maintain any credibility then they will have to stick by their previous statements and hike rates before years' end, and as mentioned earlier, December is not likely.
Global equity markets have lost $5 trillion in value over the last two weeks!-On expectations of slowing economic growth.
*remember, Yellen has indicated that any rate hike decision would be made without regard for scheduled press conferences!
Turning to the recent sell-off in US stocks which is to be blamed on the slowing of China's economy, the devaluation of the yen (which was China's attempt at reversing the recent slow-growth) and the lack of faith in the Chinese government to adequately control the housing bubble that has been growing for the last decade.
Here is Citi Banks' economist William Lee's comment: "If he (Fed Vice Chair Stanley Fischer) shows signs of worrying that the transitory downward pressures (commodity and energy prices and the appreciating dollar) are feeding through and becoming entrenched in wages and domestic prices—THAT would be a big event," the economist writes. "His concern would suggest reduced confidence in reaching the Fed inflation target in the medium term."
