FXStreet (Delhi) – Leslie Preston, Economis at TD Economics, notes that for the second straight month global financial market moves were dominated by troubles in emerging markets, which is likely to hold the US Fed from raising rates until Q1 2016.
Key Quotes
“While we remain confident that better U.S. growth will be largely domestically driven, the risks emanating from abroad have increased. As a result, we have pushed back our forecast for the first rate hike by the Fed until Q1 2016.”
“A more modest increase in interest rates has also led us to pare back the general appreciation in the U.S. dollar. We have also downgraded our forecast for the price of oil further.”
“While we expect the heightened risks emanating from emerging markets will lead the U.S. Federal Reserve to hold off raising interest rates in September, they won’t delay hikes indefinitely. The U.S. economy continues to strengthen, driven by domestic forces. These forces are unlikely to be derailed by a slowdown in China or other emerging markets.”
“Our base case is for the first rate hike to occur in the first quarter of 2016, with the funds rate rising to 1.00% by the end of 2016 and 1.75% by the end of 2017, only very slightly below our previous forecast.”
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