Rate Hike Hint Scares Market

By September 12, 2016News, Uncategorized

The relative calm that has marked trading in the major domestic equity exchanges for the past several weeks was broken on Friday as comments from Boston Fed President Eric Rosengren suggesting that the Federal Reserve could resume raising rates soon. The markets had almost completely written off any possible rate hike in September and this new bit of information caused the equity market to fall over 300 points while short and intermediate interest rates experienced a small increase in anticipation of the potential rate increase yet this month.

Rosengren is concerned that delaying a return to more normal interest rate policy could expose the economy to greater risks in the future. While the market interpreted his comments to mean that a rate hike was coming sooner than expected, he did not say that he expected those changes to come at the September meeting or before the end of the year. His speech did however, seem to agree with Fed Chair Yellen who has stated that the case for raising rates is “strengthening”.

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