Is The Fed Raising Interest Rates In July Really Gone?

After last month's failure to act, the Fed is unlikely to do so this month.

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Analysts believe that last night's speech by Stanley Fischer, the vice chairman of the Federal Reserve, means that the Fed meeting will not raise interest rates in July.

Judging by the option trading price of Eurodollar Futures, investors now expect that the probability of the US Federal Reserve's next two meetings - 26-27 July and 20-21 September meetings will remain close to 80%.

Last night, Fischer said in an interview with CNBC last night that we must wait and see how the British referendum will affect the US and the global economy; the US economy performed well after the non farm report in May; for the US outlook, the non-agricultural report was more important than Britain's withdrawal from Europe; the Federal Reserve did not plan to implement negative interest rates.

Bloomberg quoted the comments of Michael Hanson, a senior global economist at Bank of America in New York, that Fischer's comments last night were consistent with the Fed's cautious wait-and-see model.

This pattern may be maintained at the July meeting.

Since the interest rate hike was launched in December last year, the Fed has kept interest rates unchanged for four consecutive meetings.

Hanson believes that the Federal Reserve is always facing some shocks. In the context of many structural trends, from low productivity to aging population, the uncertainty of policy making is even greater. "Uncertainty makes central bank officials slow."

Fischer said last night that Britain's return to Europe was "obviously a heavy event in Britain and an important event in Europe". But it is too early to determine whether Britain's withdrawal from Europe will affect the outlook of the US economy.

In the US economy,

Sustained growth is the key to increasing the national income and maintaining the expenditure pattern.

As for the problem of low productivity, monetary policy can not be done in addition to keeping low interest rates and encouraging investment.

After the announcement of the referendum on Britain's withdrawal from Europe last Friday, the Wall Street Journal reporter Hilsenrath commented that the Federal Reserve news agency said that raising interest rates in July is unlikely at the moment.

It points out that the biggest worry of the Fed is the strengthening of the US dollar.

It is expected that the Federal Reserve will wait to see the impact of Britain's withdrawal from Europe on the US economy. If the negative factors of Britain's withdrawal from Europe are gradually emerging and continuing, the Fed's economic growth and inflation expectations will be revised, or even the Federal Reserve may cut interest rates to near zero.

While the rate of increase in interest rates has dropped, the expected rate of interest reduction has begun to rise.

The Fed's interest rate cut became another big black swan event after the British referendum returned to Europe.

Federal funds futures price indicated last weekend that the probability of interest rate cut by the Federal Reserve meeting in July was 10%, and the probability of raising interest rates was zero.

Until next February, the Federal Reserve will be more likely to cut interest rates than continue to raise interest rates.