A Fed rate hike is certainly on the cards, but the future trajectory of Fed hikes into 2016 will be steady based on inflation, urged Darren Sinden, Market Commentator for Admiral Markets, when he joined Nick Batsford and Zak Mir on the Tip TV Finance Show.
Key Points:
December Fed hike likely unless there is a string of terrible data released before hand.
Rate rises are normally associated with increasing demand and inflation, so historically theories on interest rate hikes may not be useful.
Inflation was above 3% for the 2004 US hike, for 2015 there is inflationary divergence, so we are moving into new territory.
Banks and financials have performed well with a Fed rate rise historically, but return on equities is still very low for banks compared to pre-crisis levels.
Disposable personal incomes have been rising from 2010, however, personal US spending is trending down, income inequality worrying for future US health.
Fed unlikely to get anywhere near 2% inflation target in the next 12 months, so no reason for interest rates to continue to be hiked on a steep trajectory.
Watch the video to see more analysis on the Fed interest rate hike, and the detailed slides used by Sinden to show the effects of inflation and US spending on the future rate rises in the US.
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