Market remains sceptical on Fed timing

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Janet Yellen stated on Friday “I expect that it will be appropriate at some point later this year to take the first step to raise the federal-funds rate and thus begin normalizing monetary policy”. Yet this CME tool (VIEW LINK) highlights that Fed Fund futures are pricing a 14% probability of a rate hike in Sep and 50% in Dec. This is symptomatic of investor uncertainty that the Fed will deliver on a 2015 tightening. In his most recent report to investors (VIEW LINK) Kerr Neilson from Platinum Asset Management said, “far from fearing a rise in the federal funds rate, which has been suppressed at 0.1% for six years, we are fearful of the Federal Reserve Bank losing credibility as it loiters with indecision”. The market needs a clearer 2015 roadmap from the Federal Reserve.


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