His comments come a day before Fed Chair Janet Yellen delivers a high-profile speech on inflation, a topic that has divided policymakers who worry recent readings show a weakening economy from those who are confident inflation will rebound as the United States continues to grow.
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A rate hike will restore asset allocations and prices, and the Fed’s policy should not be affected when the risk of a systemic crisis does not increase significantly because of these adjustments, Hong said.
In a Monday morning discussion on Fox News, market experts discussed the likelihood of a 2015 rate increase and noted some trading strategies for investors in the current market environment.
The bank’s decision had been forecast by most analysts.
Some economists feel the much-awaited Fed liftoff could do more good than harm as higher USA rates will send a clear message that the world’s biggest economy – and growth engine – is revving up again. Even though the Fed is optimistic about the US economy, she cited the global economic slowdown and volatile stock markets as reasons to wait on the first rate hike in nearly a decade. Both weighed in on Saturday over the FOMC’s vote to leave rates near zero. In April, the Fed tested its ability to hold a press conference by phone, and this fueled speculation that it was gearing up for a possible October hike. Governing Council member Ewald Nowotny said on Monday European Central Bank rates would stay low as long as growth did. I supported the Committee’s decision last week to hold off, and the altered risk picture relative to the economic outlook was decisive in my thinking.
The higher interest rates would make the gold less competitive in the marketplace, especially less competitive when talking about the more interest-bearing securities.
The concern is that countries that are dependent on foreign financing could be hit by sudden outflows of worldwide capital, or that currency depreciation following the Fed hike could raise debt-servicing costs for countries and businesses.
By 0630 GMT the rand had slipped 0.5 percent to 13.7500 per dollar, sinking to its weakest in two weeks as global factors dominated ahead of a domestic central bank interest rate decision later in the session.
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Lockhart speaks Wednesday, Yellen has a speech scheduled for Thursday and Bullard speaks for a third time on Friday, according to Bespoke Investment Group.
