Garrett Knight Associates: October’s stronger-than-expected nonfarm payrolls data has raised expectations that the US Federal Reserve will raise interest rates at the next meeting of the FOMC in December but Tokyo-based investment house, Garrett Knight Associates believes the central bank will attempt to hold “lift off” back until later on in 2016.

“Going strictly by the criteria they’ve established for justifying a rate hike, they’re fast running out of excuses,” noted chief economist at Garrett Knight Associates Yuri Abe. “The official unemployment rate is now down to 5%, the economy appears to be growing – not flying as such but still growing – and the fears about the knock-on effects on of global economy on the US appear to have subsided so one has to wonder, at what point they will pull the trigger.”

Interest rates have been at record lows since 2008 when then-Fed Chair, Ben Bernanke introduced the zero interest rate policy to tackle the effects of the fallout from subprime on the financial markets. Since then, the Fed has introduced three rounds of quantitative easing and “Operation Twist” in a bid to lower long term interest rates as a way to boost borrowing and economic activity.

“The Fed’s policies have met with limited success but they have succeeded in creating enormous asset bubbles in equities, bonds, even fine art and wine as investors look for yield in an environment when traditional bank deposits don’t pay any interest,” said Abe.

Garrett Knight Associates reiterated its view that US interest rates would remain on hold in December and that investors should be diversifying their holdings to include Asian and emerging market equities particularly those in Japan where the country’s central bank is expected to add to its record quantitative easing program before the end of the year.

About Garrett Knight Associates

Garrett Knight Associates is a highly specialised international investment management firm. With over a decade's worth of experience in providing our clients with discretionary and advisory portfolio services for private investors, trusts, pension schemes and high net worth investors, we use an expansive array of carefully selected investment products to maintain healthy growth targets.

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