No­mura says Septem­ber rate rise would be most paci­fist in history

The Pak Banker - - COMPANIES/BOSS -

BEI­JING: Traders say it's a coin toss whether the Fed­eral Re­serve raises in­ter­est rates from near zero next month. They're more sure pol­icy mak­ers won't be in any hurry once they get started.

Fu­tures prices show 48 per­cent odds the Fed hikes in Septem­ber, even as plung­ing com­mod­ity prices drag down in­fla­tion ex­pec­ta­tions and China's cur­rency de­val­u­a­tion sig­nals a slow­down in global growth. An im­mi­nent Fed rate rise amid broader un­cer­tainty shifts scru­tiny to the pace of sub­se­quent in­creases. Of­fi­cials have re­peat­edly low­ered their own pro­jec­tions, known as the dot plot, for how quickly and how high rates will go. "If they go in Septem­ber, it will be the most dovish hike they have ever ad­min­is­tered," said Ge­orge Gon­calves , head of in­ter­e­strate strat­egy at No­mura Hold­ings Inc., one of 22 pri­mary deal­ers that trade di­rectly with the Fed.

"They will lower the dots and they will say this is re­ally just op­er­a­tional to get off of zero." The Fed's overnight rate is not ex­pected to reach 1 per­cent un­til De­cem­ber 2016, ac­cord­ing to fu­tures prices, sug­gest­ing mon­e­tary pol­icy will change at a grad­ual pace. That com­pares with pol­icy mak­ers' own me­dian forecast of 1.625 per­cent at that date. Trea­sury 30year bond yields, which are linked to the longer-term out­look for growth and in­fla­tion, fell to 2.84 per­cent Fri­day in New York from 3.20 per­cent a month ear­lier.

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