Update | Federal Reserve unlikely to raise interest rates in June, leaving Hong Kong’s real estate market in a state of uncertainty
Disappointing US May jobs data and British referendum to stay or leave the European Union are cited by economists as reasons why the Fed is not in a hurry to boost rates
While Federal Reserve chair Janet Yellen appears to be optimistic about the United States economy, many economists believe that the Fed is highly unlikely to raise its benchmark interest rate during next week’s meeting.
Many who heard Yellen’s speech in Philadelphia last Monday feel that the central bank is not in any hurry to raise rates, especially after May’s disappointing payroll data which showed only 38,000 jobs were added last month, way below market expectations.
Nonetheless, some Fed officials had hinted in media reports there would be at least two rate rises by the end of this year, the first possibly in July. However, other economists and Fed watchers feel the central bank is not in any hurry to raise rates.
US interest rates have been kept between 0.25 per cent and 0.5 per cent since last December when the Fed raised the rate by 0.25 basis points from near-zero levels introduced during the global financial crisis. It was the first US interest rate increase in nearly a decade.
This “will they, won’t they” conundrum has raised the big question in Hong Kong of the impact any rate rise in the local real estate sector which is under pressure from falling prices.
Market players, including analysts and real estate agents, believe the impact from a possible rate rise on home prices may be modest. But some observers say uncertainty about when mortgage rates will actually edge up could prompt some Hong Kong buyers to stay on the sidelines.