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Updated: 23:26 25/09/21

Interest Rates Unlikely to Change

By Samuel Gee, News Editor

19 Sep 2016

Since rates were increased by 0.25% at the end of 2015 the Fed have often toyed with the idea of a rate hike – without ever committing to one. Investors have been kept guessing as to the Fed’s plans for interest rates and, despite recent statements signalling otherwise, they appear set to remain unchanged this week.

Stock markets have experienced a relatively strong start to the new week in what could be a strong indicator that rates will remain unchanged on Wednesday, when the Fed are expected to make an announcement. With markets now seemingly addicted to low interest rates any indication of an increase is commonly met with large scale sell offs but the buoyant mood so far this week has cast doubt on the probability of a potential hike.

A reluctance to commit to raising rates has led to market volatility in 2016, with investors never quite sure how to react to their latest statements. With central banks across the world moving closer to negative territory all the time, it seems unlikely that the Fed should be in a position to act any differently.

Furthermore US economic data is simply not strong enough to support a rate hike – GDP expectations for the third quarter continue to be downgraded while jobs data frequently fails to live up to expectations.

The Fed’s willingness to allow the public to believe in the possibility of an interest rate hike often seems an attempt to promote the idea that everything is under control rather than a feasible idea based on any supporting facts.

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