Over in the U.S representatives from the central bank have already stated that they’re intention is to have a gradual rise in interest rates. However should the economy heat up to any degree they would probably feel obliged to curb prices by increasing the cost of lending.
Norton Global’s Senior Analyst said "What is intriguing is when you take a look across a broader area of inflation measures in the U.S, there is only one that is actually below 2%, and that’s core inflation which is the PCE (personal consumption expenditure) deflator, this does hold some misinterpretations though, specifically in the health care sector."
The Fed has a target for inflation of 2 percent. Core inflation, which is calculated by deducting food and energy off the cost of goods, was 1.9% year on year in September.
Norton’s Analyst went on to say" Once a 5% percent unemployment figure is past, there will be potential for some inflation on wages in the U.S, and should this occur the Fed will have to act”. The hourly salary figure has increased by 2.5% year on year say the Bureau of Labor Statistics.
2016 is already looking like being another difficult one for investors, which is largely due to the U.S. economy’s strength continuing to grow. Generally the world falls in line with the U.S. but that may not be the case with unemployment remaining high across Europe and China which is transitioning to a consumer economy.
Norton Global believe the Fed will have some ups and downs while it attempts to navigate through to higher interest rates while on the other side of the Atlantic the European Central Bank persists with its monetary policy aimed at boosting Europe's economy. With this in mind there are likely to be some large changes in capital flows making them difficult to trade.