Fed wants a December rate hike, US elections main risk - ING

Rob Carnell, Chief International Economist at ING, see a December rate hike very likely after today’s FOMC statement. According to him US presidential elections have the possibility of delaying the rate hike.

Key Quotes:

“The Fed left rates unchanged at its September meeting. But the statement of the meeting gave the clearest indication yet that rates will soon rise. Once again, however, the Fed decided to wait for more information before hiking.”

“We think a December rate hike is the Fed’s current intention, though they still have to get through the Presidential Election on 8 November, and that could yet lead them to delay again if markets weaken on the outcome. So while the evidence is mounting for a December hike, we are going to wait until we know the outcome of the election before bringing forward our 1Q17 hike forecast.”

 “The most important part of the Fed’s statement was the phrase, “The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives”.

“So a December hike looks extremely likely right now, barring the politics – but with the Presidential race looking closer and closer, there is still a chance of further delay.”