Global Insight: Low Altitude Liftoff

Most market watchers seem to be missing the point about the Fed’s impending rate hike cycle.  It’s not about the when, it’s about the how. 

For months the Federal Reserve has been expressing its desire to begin policy normalization by raising interest rates, moving away from the zero interest rate policy (ZIRP) that has been in place since December 2008. The actual launch has been delayed for a variety of reasons, but with the Federal Open Market Committee (FOMC) meeting in September, policy liftoff may finally be upon us. However, as with most things Fed-related, the final decision whether to move or not will likely come down to policymakers’ focus. Is it just on the U.S. economy or are they taking a broader view to include global developments and recent volatility in financial markets?

This article analyzes how domestic and global developments will impact future policy changes and could likely result in a very different tightening cycle.