With the possibility of the United States hiking rates today here is what you need to know and how it could affect you.
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So now the Fed wants to get back to more normal conditions. “Retirees have suffered in the environment of low interest rates recently”.
“I think the Fed will raise rates dramatically less than the Dot plot implies”, says Ben Laidler, global equity strategist at HSBC.
Gold futures on the COMEX division of the New York Mercantile Exchange fell on Tuesday as the US dollar showed strength ahead of the Wednesday meeting of the US Federal Reserve. And on anybody’s forecast it’s gonna be a long time before we’re gonna be in a position to reduce rates by three percentage points. “Likewise, any variable rate loan (like credit cards) will climb as well”. “The risk that things go wrong is greater than things going well”, he said, as policymakers may find that the U.S. economy is already slowing, and that a string of rate rises turn out to be too “aggressive”. The current Wall Street Journal Prime Rate, based on surveys of large banks, is 3.25 percent. On a yearly basis, the CPI index edged up by 0.5% over the last 12 months, considerably above gains of 0.2% in October.
But the Brazilian real, which has lost 31 percent in value against the dollar this year, is expected to drop from about 3.81 per dollar on Wednesday morning to below 4 to the USA currency if the rate hike is made as expected. If the Fed achieves its goal, inflation should remain under control, which means consumers will feel encouraged to spend on goods and services.
But core inflation, which strips out food and energy, was at an annual 2 percent in November according to the report.
“Most of us would be really shocked if it didn’t happen”, said Joel Naroff, president of Naroff Economic Advisors in Holland, Pa. “But with the Fed, you never say never”.
A London Underground sign outside Westminster Station. Past surveys show that many economists expected the first hike to be in 2010. Still, fears of having less buying power could prompt a spurt in home sales in some markets – pushing those who have been considering buying a home off the fence.
There is also a lot of economic data being released today, although I’m not sure it will have quite the same impact that it ordinarily would.
Q: What about rates on auto loans? Since the global financial crisis, several central banks, from Israel’s to New Zealand’s, have raised rates only to have to reverse course soon after. It has resumed, but credit is tight.
Farka believes the feds should have increased interest rates “at least one year ago”. If lending picks up, that could be the added push that the overall economy has been lacking.
How much more am I looking at?
In a client note last week, Morgan Stanley’s Ellen Zentner said it would be a mistake for the Fed to leave markets’ expectations for gradualism right where they are. “From the point of view of savers, of course, this has been a very hard period”, she has noted.
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I would say that the Fed has no choice but to raise rates given the predicate that has been laid and the expectations that have been set…They chose to signal a rate increase in December and given that signal it is now appropriate to go through with it.
