Off the back of Federal Reserve chairman Ben Bernanke’s suggestion of possibly tapering quantitative easing by the end of the year, economists remain sceptical that interest rates in the US being raised anytime soon.
Hermes chief economist Neil Williams says he is “fairly upbeat” on the US economy but says: “Behind the scenes this needs to stop at some stage.
”The Fed is looking for 6.5 per cent unemployment before they look at rates but the line in the sand is 7 per cent.
“Is Obama really going to sign off on a hawkish chairman of the Fed? We have never known an established independent central bank to turn off QE.”
Schroders chief economist and strategist Keith Wade says: “Although the Fed has been more hawkish than expected of late, the central bank is not expected to hike the Fed funds rate next year as suggested by current Fed funds futures rates.
“2015 seems to be more likely as a date for the first rate rise. Growth would have to be very robust to trigger an earlier move which we see as unlikely given the headwinds.”
And Towry head of investment Andrew Wilson is also sceptical of the Fed’s plans for interest rates due due to the very nature of the US economy.
Wilson says: “We still can’t see the US raising interest rates for at least another year or two, as the US, like most of the developed world, cannot handle higher rates.
“It would cause severe disruption to housing markets and the very solvency of governments and domestic banks.”