Fed Will Raise Rates Faster Than Investors Expect

JUN 17, 2014 - 7:08 am

According to most economists surveyed by Bloomberg News, the Fed will probably raise its benchmark interest rate faster than money-market investors expect.

Bloomberg notes that eurodollar futures, the world’s most actively traded short-term interest-rate contract, are underestimating the pace of tightening over the next two years, according to 55% of 56 economists in the June 12-16 survey.

Bloomberg quotes a senior economist at Deutsche Bank Securities as saying, “Investors may be focusing on the first-quarter economic contraction caused in part by unusually severe winter weather. Instead, they should be paying attention to recent signs of rebound.”

To view the full Bloomberg news report, click here.

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One Reply to “Fed Will Raise Rates Faster Than Investors Expect”

Ricahrd Reuling

June 17, 2014 at 7:48 am

the feds are not going to make the sharp kind of interest rate increases in either 2015 or 2016 because to three reasons. That is not to say there may not be an increase, but clearly not as sharp as the story indicates. The reasons are:

1. There is no indication of any sustained inflationary pressure.
2. In the US and even more so the world, the recovery is still very weak and very spotty. To raise rates now could scare the markets into stopping whatever modest spending is starting to appear.
3. 2016 is a presidential election and the Feds have never wanted to be seen as influencing an election.