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2 Sep 2015
Fed lift off could be delayed because of Chinese turmoil - BAML
FXStreet (Delhi) – John Shin, Research Analysts at Bank of Ameriaca Merrill Lynch, believes that the markets are concenred that the Chinese turmoil could result in delay of Fed interest rate hike cycle.
Key Quotes
“China kicked off an exceptionally volatile August with both a surprise depreciation of the CNYand a massive drop-off in equity markets. The economic impact might have been narrow in isolation, but global markets moved into turmoil amid the growing possibility that China was falling into a deeper slowdown and that their government no longer had robust control over the economy.”
“The downside consequences for other emerging markets, as well as commodity appetite, will likely be more persistent even as markets later showed some signs of recovery, especially on the equity side.”
“Still, the impact on developed markets could be more transitory, particularly in the US, where many of the core fundamentals still point to significant macro progress. The volatility was especially painful given that markets had begun to settle into the view, at the start of August that the Fed would be kicking off the first rate hiking cycle in nearly a decade at their September meeting.”
“The focus will be even more intense than usual on the August payroll number, which will be the last one leading into the FOMC decision scheduled on September 17th. The solid pace of job growth and continued drop in the unemployment rate has still implied a Fed on course to begin rate normalization.”
Key Quotes
“China kicked off an exceptionally volatile August with both a surprise depreciation of the CNYand a massive drop-off in equity markets. The economic impact might have been narrow in isolation, but global markets moved into turmoil amid the growing possibility that China was falling into a deeper slowdown and that their government no longer had robust control over the economy.”
“The downside consequences for other emerging markets, as well as commodity appetite, will likely be more persistent even as markets later showed some signs of recovery, especially on the equity side.”
“Still, the impact on developed markets could be more transitory, particularly in the US, where many of the core fundamentals still point to significant macro progress. The volatility was especially painful given that markets had begun to settle into the view, at the start of August that the Fed would be kicking off the first rate hiking cycle in nearly a decade at their September meeting.”
“The focus will be even more intense than usual on the August payroll number, which will be the last one leading into the FOMC decision scheduled on September 17th. The solid pace of job growth and continued drop in the unemployment rate has still implied a Fed on course to begin rate normalization.”