The Federal Reserve has to give markets something for a December hike in next week’s FOMC, says Jeremy Stretch, Head of G10 FX Strategy at CIBC, as he speaks on the US rate hike scenario and Fed communication in today’s Tip TV Finance Show.
Yellen: Problem with communication
Stretch notes that Yellen’s communication to the market has not been top notch, this was also seen during the taper-tantrum days in US where she was in charge of communicating the Fed’s views.
Fed creating additional uncertainty
Fed had the opportunity to raise rates in the past but failed to do so, and quoted global situation to be a cause in the last meeting. Although no rate hike is likely in this month, the Federal Reserve has to use the FOMC meeting as an opportunity for placing December as a likely timing for the liftoff.
With respect to a broader perspective, Stretch mentions that the Fed is only creating additional uncertainty in the markets. Looking at the duration of this economic cycle, this remains the 5th longest cycle, and looking at the depth of the trough in 2009 means it could take longer for growth now.