Will the Federal Reserve raise interest rates or will the United States central bank delay a rate hike once again? Fed officials seem pretty optimistic that a rate hike will happen next month, while the market is open to the idea, too. The CME Group FedWatch tool suggests that there is a 24 percent chance of a September rate hike – that number jumps to 53 percent in December.
So a Fed rate hike is almost certain, correct? Not exactly.
Morgan Stanley said on Tuesday that it doesn’t think the Fed will actually move ahead with a a September rate hike. In fact, according to the financial institution, none of the policymakers said or did anything during the central bank’s summer retreat in Wyoming to change its mind.
“We found little at Jackson Hole to sway our view on the U.S. Treasury market,” Morgan Stanley strategists Matthew Hornbach and Guneet Dhingra wrote in a client note. “While August payrolls present an obvious risk, we continue to believe market-implied probabilities for a September rate hike will end at zero, not 100.”
The bank suggests that investors continue to purchase five-year U.S. sovereign debt.
The Federal Open Market Committee (FOMC) will meet on Sept. 20 and 21. This is when the Fed will decide if a rate hike is warranted or not. The biggest factor, notes Fed Vice Chair Stanley Fischer, will be the August jobs report.
The Fed has only raised rates once in the last decade.
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