Stronger possibility of rate hike in the month of December according to FED chair Janet Yellen

There has been a massive chaos in the global market from the very beginning of the month of November due to the U.S presidential election and pending rate hike decision by the FED. Upon the completion of the U.S presidential election, the green bucks have exhibited immense strength in the global economy in the last few days. According to Federal Reserve Chair Janet Yellen, the recent performance of the labor market and U.S economy is showing promising strength which is mostly likely to go in favor of the interest rate hike in the month of December. Though the statement from the FED chair didn’t indicate any direct hint about the rate hike decision in the month of December but investors are considering this statement as a positive approach from the FED after the U.S presidential election.

However some optimistic stock traders are overly concern about the rate hike decision and according to them, the FED might wait for the next year to raise their interest rate which is highly unlikely. The three-day international gathering of the central bankers in Jackson Hole, Wyoming, FED chair Yellen stated that the U.S economy is now pretty stable with maximum employment and price stability in the stock market. Leading hedge firm and economic researchers are considering this statement as an indirect indication of a rate hike in the month of December by the FED. To be precise the overall fundamental view of the U.S economy is exhibiting immense strength in the global market after the U.S presidential election which is going to act as the key ingredient for the FED to raise their interest rate.

Over the last few months, the U.S economy is showing significant improvement in labor market and U.S consumer sentiment is also positive in the current situation. Considering the ongoing stable performance Yellen stated that “In light of the continued solid performance of the labor market and out outlook for economic activity and inflation, I believe the case for an increase in the federal fund rate has strengthened in recent months”. Such a solid statement has dramatically increased the rate hike decisions to 81.3 % in the month of December. She also added that if they hike their interest rate in the month of December than the might again go for another hike with the gradual development of their economy. If the FED comes up with the hawkish rate hike then it would be a dramatic event in the stock market since the FED haven’t hiked their interest rate nearly for a decade.

Yellen believes that rate hike will help the global economy to a great extent and financial stability will be reflected in the major financial sectors. Investors are cautiously waiting for the rate hike decision by the FED since they believe the ongoing financial crisis will settle down in the stock market if the FED hike their rate with a clear hawkish statement. Though Yellen is representing rate hike in an optimistic way but the major policy maker in the FED are cautiously divided into two groups. According to the optimistic group, the month of December is the perfect time for the FED to hike their interest rate and bring stability in the global market. On the contrary, the conservative groups are still in doubt and thinking that they should wait furthermore in order to reinforce their economy for the near term future.

Yellen has been optimistic about their rate hike decision after the recent presidential election but due to two distinctive group in the FED policymakers, confusion still remains in the market. Yellen has also briefly described his plan in last Friday at the FED conference on how they are going to make U.S economy much better even after they have cut rates near to zero which will give abundant money to the banks. The proposed new policy framework tends to be promising but leading economist suggests that this might have an adverse effect on the U.S economy in the long run. To be precise she clearly demonstrated how they are going to deal with their future economic crisis and have also given precise layout to overcome any recession. But some leading economist in the world believes that this might slow down the performance of the U.S economy in the long run.

If the economy starts to perform slowly then there is slight chance that the FED will be left with no option to cut their interest rate in the near term future to bring economic stability. But all these statements from leading economist and investors are considered to be an exaggerated view by Yellen since FED will always have the option to purchase a bond in their need to ease economic hardship of the country. Such a clear statement from the FED chair, clearly demonstrates then Yellen is ready to hike their interest rate in the month of December to bring economic stability in the U.S economy.

Summary: After the recent presidential election there has been a new ongoing issue between the leading economist and FED chair Yellen. According to leading economist an imminent rate hike in the month of December just after the presidential election might affect the performance of the U.S economy in the long run. But Yellen thinks that such a conservative statement is not enough to postpone their rate hike in the month of December since they always have the option to purchase a bond to smoothen economic recession. Considering all the facts the over bias remains positive for the rate hike decision in the month of December.