Welcome to the first installment of the Different Minds series. In this weekly series I will be asking a question and I will be featuring different bloggers from the community and getting them to answer the question from their point of view. In doing this it will allow us to see how different minds interpret the same question. This week we have 3 great investors who each share a unique opinion and have been consistently creating value and sharing it on each of their respective blogs. I highly suggest everyone to take some time to check out their blogs. Now let’s go ahead and see what the question is for this first edition.
” After Janet Yellens most recent speech from Jackson Hole, do you see a rate hike happening this year?
Why and when? “
Barring a massive change in the economy I expect we’ll see an increase in the Fed Funds Rate up to 0.75%. The economy can absorb the rate hike because in all honesty we’re still talking about near all time low interest rates even with a hike. Maybe it’ll curb the enthusiasm of many of these companies from taking on debt just because it’s cheap although that’s likely wishful thinking. I think the Federal Reserve bankers will try and gain any bit of flexibility to boost the economy should the economy start contracting, which we’re due for it to happen based on history. Right now their hands are kind of tied to immediately jumping into further QE via bond purchases or other asset purchases because they don’t have much room to change the interest rate.
JC from Passive-Income-Pursuit.com
There has been so much rate hike chatter for well over two years that I’m surprised I do not see odds being placed in Las Vegas on the matter. I am not a believer of any words that comes out of our federal government, especially the Federal Reserve Bank chair. I feel the U.S. economy is still very much on shaky ground and a raise in interest rates is not imminent. With the whole world desperately trying to stimulate growth with lower interest and even negative rates it just shows that our global economy, of which we are a part of, is too weak sustain any meaningful raise at this time.
Keith Park from Divhut.com
I think a rate hike this year is unlikely. If one occurs, though, I think it will happen in December after the elections. The Fed is in a precarious position. They have to signal the possibility of a rate hike to inhibit excessive risk taking. They have to counteract a growing sense in the market that the Fed lacks a credible plan for interest rate decisions. They have to weigh the impact of a rate hike on the growth of employment, output and demand, especially in view of stagnant productivity and the economy’s dismal current growth rate of 1.6 percent. They also have to consider the world context of low oil prices, China’s slowdown, Brexit, zero or negative interest rates, and the strength of the dollar. Given all of these challenges, I think the Fed will have no choice but to delay any interest rate hikes until next year.
FerdiS from DivGro
That concludes this weeks edition of Different Minds. I would like to thank everyone who contributed to this 1st edition of Different Minds. I hope that everyone enjoyed the different insights about how the Fed will act during the course of the rest of the year. If you would like to weigh in on the subject then please feel free to leave a comment below. If you are interested in being featured in an upcoming edition of Different Minds just jump on over to my Contact Me page and send me a message. Until next time happy investing!