Jake's View | Crystal ball forecasts further Fed dithering in 2016
The vaunted recovery on which expectations of a return to normalcy rest looks decidedly anaemic
Fed rate rise turns up heat on HK banks
Business headline, December 16
Well, if our headline writers are allowed to assume that the US Federal Reserve will raise interest rates, why can’t I?
I think it a relatively safe forecast that the decision, made by the time you read this, will have been for a 25 basis point increase in the fed funds rate. I also think it obvious that US monetary policy will continue to be one of the key driving forces of financial markets in 2016.
Thus it is time to announce the readings of my crystal ball for next year, particularly as I like to reserve the last two weeks of the year for hill-walking, feasting and Christmas laziness, which means this is my last column for 2015. I think US interest rates are going nowhere.
For perspective, the chart shows you the 60-year history of the fed funds rate, 0.08 per cent at present. The straight line across the chart shows you the average of that period. 5.19 per cent, which we shall define as normalcy, a target to which the Fed faithful say we are returning.