Economists note: The economy has emerged from a tough recession and slow recovery, in which the Fed deemed ultra-low interest rates necessary but in the past decades, the stock market has moved upward solidly with short rates in the range of 3 or 4%. On the other hand, “given the weakness in emerging markets, it wouldn’t come as a complete shock if they chose to hang back a little bit”.
5) Fed is super dovish: strongly emphasize the downside risks and headwinds to raising rates within the current economic outlook.
OIL WATCH: The price of oil fell on weakness in the gasoline market brought on by high fuel supplies and the end of the summer driving season.
He added, “When it does, the housing market isn’t doomed to fail, but rather adjust to the reality of interest rates that are reflective of a strengthening economy and certainly more traditional financial conditions.”
Uncertainty about the Fed’s decision whether or not to hike rates in its two-day policy meeting has been contributing to recent volatility in the market.
“Everybody is waiting to see what happens when and if the Fed raises rates”, he said.
With the September-or-December vicissitudes going on for so long, this week will be the first real chance in a long time to prove the predictors right or wrong.
Central banks use interest rates as a tool to stimulate the economy when it is sluggish or cool economic activity when inflation rises too sharply. After seven years of easy money, the monetary policies in the USA, Japan and the Eurozone are causing EM currencies to dip from overvalued into undervalued territory.
The bond market suggests policy makers will wait to raise rates, while economists are equally divided.
But if interest rates start rising, will that automatically reverse the stock market’s momentum? Canadian bond prices tend to rise and fall in tandem with USA rates. Money-market derivative traders see the funds rate sill below 1 percent by the end of next year. FCA CEO Sergio Marchionne canceled plans to attend the Frankfurt <strong>globalstrong> Motor Show in Germany and instead stayed in the US, a strong sign that a deal was near.
Indonesia’s rupiah reached a 17-year low against the dollar as trade data pointed to weak growth in Southeast Asia’s largest economy.
Where are Canada’s exports now?
Lack of inflation in USA economy has been one of the reasons for the uncertainty surrounding previous central bank meetings.
PLUNGE: Raptor Pharmaceuticals dropped 37 percent after the drug developer said it may scrap development of a liver disease treatment because it failed to pass a key test. The company’s stock slumped $4.51 to $7.52.
Although investors may fret about the impact of slowing Chinese growth, United States consumers appear to be shrugging off these fears, and instead are taking advantage of lower petrol prices to boost spending.
Where is the S&P/TSX composite index now?