Market Overview

27 March 2015

Do we see any interest rate hikes this year?

There were a lot of speeches by Fed, Bank of England and European Central bank officials this week. We heard conflicting opinions. But clear signs of interest rate hike timing were missing. The most officials said that the recent weak economic data was temporary. Nevertheless, some officials downgraded their economic growth forecasts.

Certainly, it is too early to say how the economic data stands later in the year. For instance, bad weather in the U.S. weighed on the economy. But if we won't see solid U.S. economic data in the next two months, it is unlikely that the Fed will raise its interest rate in June.

Earlier, officials said that the economy will be boosted by higher household spending due to lower oil prices. But household spending in the most major economies do not show higher expenses yet.

Consumer inflation remains low. Officials said that consumer inflation will increase as oil prices will stabilise. Higher oil prices would mean higher energy prices and product prices. It could lead to a decline in household spending.

Higher consumer inflation alone does not mean the economy will grow.

In my opinion, the central bank officials are concentrated on higher inflation but the implementation of reforms to spur the economy is moving more into the background.

In summary, it is unlikely that we will see any interest rate hike in the U.S. or the U.K.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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