At this point any rate hike looks like a big giant excuse for people to sell off stocks. People want to sell, really sell, one can feel it, but people don’t want to fight the Fed. However, if Yellen shoots a flare into the sky people will move on it. People just want a reason. Which is why Yellen probably won’t move rates.
It would be a pretty bold move for Yellen to hike in the midst of what looks like a possible looming recession in much of the world (Brazil, Australia, China) even if things are barely positive in the US from her perspective. On the other hand if recession is looming a move now might signal confidence in the US economy just enough to let the Fed gather some ammo for what is coming down the line. (Not that a quarter point would make much difference.)
Alternatively we could just have markets set interest rates, like they should, and we could all stop hanging on the words of a financial politburo. But that would make too much sense.
The likelihood of an interest rate hike in September fell after Wednesday’s release of the latest Fed minutes, RBS said.
Based on its calculations, RBS said the futures market was pricing a 36 percent chance of a September hike after the minutes.