- Dr Harm Bandholz, chief US economist at UniCredit Research
All eyes are now on long-anticipated Fed's decision later in the day, with increasing chances (81.4% of probability) of a rate hike, the first in nine years. Meanwhile, investors have to answer a number of questions such as ‘ Where to invest when the Fed raises rates? How the Fed could challenge markets? What will be the pace of rate hikes moving on forward? Will the US and world's economy withstand policy normalization" and many more. Yet, the main questions remains ‘Will the Fed eventually hike interest rates today?'
Meanwhile, US data continues to point to a strong impetus in the world's number one economy. US underlying inflationary pressures rose in November even as renewed decline in gasoline prices kept overall consumer prices in check, providing the Fed with more ammunition to hike rates later in the day. According to the Labor Department, the core consumer price index, which strips out food and energy, climbed 0.2% in the reported month. In annual terms, the core CPI rose 2.0%, the biggest gain since May 2014, after edging higher 1.9% in October. The overall CPI remained unchanged last month following a 0.2% increase in October. In the 12 months through November, consumer prices increased 0.5%, the largest gain since last December, after rising 0.2% in October. The Fed targets 2% inflation.
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