Our View on The US Fed’s Interest Rate Decision

Comment from Colin Beveridge, Chief Investment Officer for True Potential Investments.

The decision from the Federal Open Market Committee not to raise rates was always a finely balanced one. Conditions favouring keeping rates on hold include recent dollar strength, widening credit spreads and lower share prices, along with predictions for slower economic growth emanating within China.

Those predicting a rate rise can point to strong US growth, both current and forecast and, perhaps the strongest indicator for a rise, strong jobs growth since the US began stimulating their economy, with unemployment now standing at 5.1%.

Although the decision to remain on hold is likely to add to uncertainty, there are two further meetings this year, October and December, in which to change rates. Raising rates is the intended direction of travel but it seems that Global uncertainty for now is a restraining factor along with soft data on inflation.

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