Standard Chartered: no Fed rate raise expected before start of 2018

The US Federal Reserve won’t raise interest rates until at least the beginning of 2018, Standard Chartered forecasts.

“The Fed is not likely to raise the interest rate this year, and the possibility for a rate hike in 2017 is also quite slim. The Fed is expected to raise interest rates in the start of 2018 at the earliest,” said Kelvin Lau, a senior economist at Standard Chartered Hong Kong.

Under that scenario, the bank sees the yuan at 6.67 against the US dollar by the end of this year, as the Chinese government has enough ammunition to support the currency above 6.7 against the greenback in the short term.

Standard Chartered’s prediction for the yuan is optimistic compared with the results of a survey it conducted in August, which showed about 53 per cent of respondents expecting the currency to weaken further against the US dollar in the next three months. Only 7 per cent saw the currency strengthening.

The generally pessimistic forecast is accompanied by companies’ weak sentiment towards the usage of the yuan in offshore markets. This could disappoint the Chinese government, which has been trying to internationalise its currency.

“Weak market confidence, soft China growth and lingering uncertainty about RMB policy should keep existing users of the yuan cautious and potential users on the sidelines for longer,” said Lau.