Will there be a rate hike in September after all?
Personally, I think there won’t be a rate hike—the most likely scenario is “hold steady.” Although inflation is somewhat sticky, employment and consumer spending are already weakening. Forcing a rate hike could easily choke the economy. The Fed is more inclined to pause first and take a look.
If the latest CPI released before the meeting again surges beyond expectations and inflation clearly proves difficult to rein in, only then might the Fed push ahead with another 25-basis-point increase. Otherwise, the probability of a 25-basis-point hike is low.
If there is no rate hike, how might the market move? In the short term, the market could breathe easier and possibly rebound. But interest rates will still remain high, and liquidity won’t be loose. Sustained capital inflows are still needed to support the market—and that’s not enough yet. So, a rebound is possible, but with high rates still in place, a major sustained rally is temporarily short of funds.
Personally, I think there won’t be a rate hike—the most likely scenario is “hold steady.” Although inflation is somewhat sticky, employment and consumer spending are already weakening. Forcing a rate hike could easily choke the economy. The Fed is more inclined to pause first and take a look.
If the latest CPI released before the meeting again surges beyond expectations and inflation clearly proves difficult to rein in, only then might the Fed push ahead with another 25-basis-point increase. Otherwise, the probability of a 25-basis-point hike is low.
If there is no rate hike, how might the market move? In the short term, the market could breathe easier and possibly rebound. But interest rates will still remain high, and liquidity won’t be loose. Sustained capital inflows are still needed to support the market—and that’s not enough yet. So, a rebound is possible, but with high rates still in place, a major sustained rally is temporarily short of funds.