JSW Corporation: Opposing views from various Fed officials over what the next move in US interest rates should be have rocked global markets this week. Comments from Eric Rosengren, President of the Federal Reserve Bank of Boston and Dennis Lockhart, President of the Federal Reserve Bank of Atlanta appeared to take a hawkish tone, calling for a rate hike as early as September.
In contrast, remarks made by Lael Brainard, one of six permanent voters on the Federal Open Markets Committee, took a more dovish tone suggesting that “the case to tighten [monetary] policy preemptively is less compelling”.
The Dow Jones Industrial Average plunged by almost 400 points on Friday but, by Monday’s session, the index had pared its losses significantly, rising by 240 points. Asian markets followed their US counterparts’ downward move but mounted lackluster rallies in their next sessions despite better than expected economic data out of China.
“Markets have traded sideways in recent weeks and these Fed comments have certainly shaken investors out of their complacency,” said Vivian Wang, Chief Economist at JSW Corporation.
“Fortunately, as far as JSW Corporation is concerned, we’re betting on the fed funds rate remaining unchanged come next week. We think the volatility owes more to how investors expect other investors to react to what these Fed officials say rather than the content of the message being sent by the Fed itself.”
The firm has told clients in no uncertain terms that it does not expect an increase in US interest rates in September and it has reduced the odds of a hike in December to just 35%.

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