Technical & Fundamental Oil Reports Specialists

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Momentous and symbolic or a fuss about nothing?

Published Thursday, September 17th, 2015

Is the world facing a financial tsunami or a financial millennium bug? Is a Fed rate increase really a momentous event or cry-wolf alarmism? Grown men and women quaking in their boots over a tiny interest rate increase is not an edifying sight. Is the global economy really that fragile that a 0.25% increase in US interest rates could tip it into recession?

It would seem that disaster is around the corner whichever way the Fed turns. Do nothing and the US domestic economy will overheat, raise rates and emerging economies will go into meltdown. Common sense screams that if the global economy is so sensitive, despite so many assurances of recovery, those pulling the levers are out of their depth and sailing blind.

The Fed replaced forward guidance with data dependency as the best indicator of when interest rates would be raised. Far from clarifying the issue for markets it has merely served to increase uncertainty because data is inconsistent and its interpretation subjective. On the one hand US unemployment has fallen to target levels and 2Q GDP growth came in at 3.7%, on the other hand wage growth is sluggish and inflation well below 2%.

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Posted by David Hufton