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Following Friday’s comments by Boston Fed President Eric Rosengren suggesting an interest rate hike in the near term may be necessary to salvage the U.S. economic recovery, ahead of the bell to start the week Atlanta Fed Chief Dennis Lockhart now says a rate hike — possibly as early as next week’s FOMC meeting — warrants “serious consideration.” Futures are down following Friday’s big sell-off.
It was a notion almost wholly dismissed that a September rate hike was at all possible up until the annual Fed retreat to Jackson Hole, where we began to hear a burgeoning chorus of Fed presidents coming out in favor of another quarter-point raise. This, despite negative interest rates elsewhere on the globe, a meek continued recovery in the domestic markets and an upcoming General Election that appears to be tightening.
Although Lockhart’s statements this morning include that the U.S. economy is "chugging along, not stalling out,” he did openly wonder whether the current 25 basis-point rate is still appropriate. For those paying close attention, Lockhart was already one of the FOMC members who’d been on board for a rate increase at least as far back as Jackson Hole, along with Kansas City’s Esther George, New York’s William Dudley, and Vice Chairman Stanley Fischer.
Eyes and ears are now finely tuned toward next week’s meeting, assisted by the fact that we are still at a low ebb of economic data. Aside from this week’s unique island of earnings reports — including important industry front-runners like Oracle (ORCL - Free Report) , Nike (NKE - Free Report) and FedEx (FDX - Free Report) — Q3 earnings season won’t begin in earnest until a month from now. New jobs data (aside from weekly jobless claims) won’t be forthcoming for a few more weeks, nor will new GDP reports.
Consider this current sell-off, for now, as nothing more than a near-term hedge toward a “surprise” rate hike next week, though the overall climate still suggests no raise until this December at the earliest. Certainly the percentages of probability have gone up — as has the VIX (Volatility Index) — but if this becomes another false alarm, expect to see a swift reversal of fortunes in the equity markets.
Mark Vickery Senior Editor
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Fed Presidents Sharpening Talons
Monday, September 10, 2016
Following Friday’s comments by Boston Fed President Eric Rosengren suggesting an interest rate hike in the near term may be necessary to salvage the U.S. economic recovery, ahead of the bell to start the week Atlanta Fed Chief Dennis Lockhart now says a rate hike — possibly as early as next week’s FOMC meeting — warrants “serious consideration.” Futures are down following Friday’s big sell-off.
It was a notion almost wholly dismissed that a September rate hike was at all possible up until the annual Fed retreat to Jackson Hole, where we began to hear a burgeoning chorus of Fed presidents coming out in favor of another quarter-point raise. This, despite negative interest rates elsewhere on the globe, a meek continued recovery in the domestic markets and an upcoming General Election that appears to be tightening.
Although Lockhart’s statements this morning include that the U.S. economy is "chugging along, not stalling out,” he did openly wonder whether the current 25 basis-point rate is still appropriate. For those paying close attention, Lockhart was already one of the FOMC members who’d been on board for a rate increase at least as far back as Jackson Hole, along with Kansas City’s Esther George, New York’s William Dudley, and Vice Chairman Stanley Fischer.
Eyes and ears are now finely tuned toward next week’s meeting, assisted by the fact that we are still at a low ebb of economic data. Aside from this week’s unique island of earnings reports — including important industry front-runners like Oracle (ORCL - Free Report) , Nike (NKE - Free Report) and FedEx (FDX - Free Report) — Q3 earnings season won’t begin in earnest until a month from now. New jobs data (aside from weekly jobless claims) won’t be forthcoming for a few more weeks, nor will new GDP reports.
Consider this current sell-off, for now, as nothing more than a near-term hedge toward a “surprise” rate hike next week, though the overall climate still suggests no raise until this December at the earliest. Certainly the percentages of probability have gone up — as has the VIX (Volatility Index) — but if this becomes another false alarm, expect to see a swift reversal of fortunes in the equity markets.
Mark Vickery
Senior Editor