Several officials have said since their gathering that September could be the time for liftoff.
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“Global growth is really important”. But the gyrations in the markets were not dramatic enough to waylay the Fed, analysts said.
The latest turn in the Greek crisis occurs amid other financial troubles overseas.
They will be preparing the market for further action and signalling their intentions well in advance. The Dow Jones Industrial Average fell 1.95%, a modest move compared with the 4.4% drop it registered the day after Lehman Brothers collapsed in September 2008.
Rosenberg notes this is a contrary opinion, as many see the yield curve flattening at a higher level as short rates rise. A national referendum next week could set Greece toward resolving a standoff with creditors-or it could send it toward departure from the eurozone.
“At the margin that’s a factor that could tilt the balance towards being more cautious in raising interest rates in the United Kingdom and the USA but it won’t be the main factor, especially for the (U.S.) Federal Reserve, and we still think it’s likely the Fed will raise rates later this year”, Andrew Kenningham, a senior economist at Capital Economics, told CNBC on Tuesday.
Kelly said the situation in Greece will be dire if no agreement is reached that will allow banks to reopen and credit to start flowing again.
While economic data have improved since then, New York Fed President William Dudley called Greece a “huge wildcard” for the USA outlook in an interview with the Financial Times published Sunday.
The policy-setting Federal Open Market Committee left rates near zero at its meeting on June 16-17 and signaled that recovering growth would probably warrant raising rates later this year, though the pace of subsequent increases is likely to be gradual.
Developments overseas could thwart those goals in several ways.
A stronger dollar cuts into exports by making US goods more expensive overseas, while making imports cheaper. Stock-market volatility could crimp business investment and consumer spending.
The timing of all this worldwide turmoil is poor for US central bankers eager to “normalize” US monetary policy after years of unprecedented stimulus in the wake of the 2008 financial crisis.
The Fed may not delay its rate hike plans because of that, but it could make the management of markets more hard, and cause longer-term bond yields to behave in unexpected ways – falling because of the inflow of capital, for example, at the time the Fed is trying to push them up.
With global investors skittish about a Federal Reserve rate hike and a market that is showing some signs of altitude sickness, getting your mid-year bearing when it comes to equities is like nearing one of the poles: Your compass needle is going to shake, and it’s easy to head off in the wrong direction.
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Debt levels are high and growth rates are low, hardly the combination that screams out for tighter monetary policy.
