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Fed rate forecasts: rhetoric or reality?

Thursday, December 15, 2016 - 01:31

European bank stocks get a boost from the Fed's interest rate hike but markets elsewhere wobble on the prospect of three further rate hikes signalled for next year. Ivor Bennett reports.

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It was good while it lasted. But the view in Asia, at least, is the party's over. One Fed rate hike isn't a problem in itself, it's more the prospect of another three next year. SOUNDBITE (English) JASPER LAWLER, SENIOR MARKET ANALYST, LONDON CAPITAL GROUP, SAYING: "That's higher than the market previously expected. And the readjustments that we're seeing today - a sharply stronger dollar, rising U.S. treasury yields - that's all reflecting the possibility of more rate rises next year." In Europe, though, there's a sense of déjà vu. After the last hike, the expectation was that four more would follow. But in the end there was only one. (SOUNDBITE) (German) CAPITAL MARKETS STRATEGIST AT ODDO SEYDLER BANK, OLIVER ROTH, SAYING: "What the U.S. Federal Reserve chief has forecast in the past hasn't always come true. So the markets aren't totally convinced the rates really will go up. We'll see, but at the moment it's not spoiling the mood." Whether the party continues depends on Donald Trump. The spending he's promised would boost inflation and treasury yields - hence the prospect of further hikes. But counter that against the potential hit to global trade. And it's anybody's guess what happens next. SOUNDBITE (English) JAMES BEVAN, CHIEF INVESTMENT OFFICER, CCLA, SAYING: "If you lift the lid on the actual detail on his plans, first they may well turn out to be much less in terms of actual money spent. Second there is a significant reliance on the private sector and not the government. Therefore I think Mrs Yellen is quite right to fire a shot across the bows." If there's another salvo, it'll come in March. Until then, it's a nervous wait.

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Fed rate forecasts: rhetoric or reality?

Thursday, December 15, 2016 - 01:31