This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
As we head towards the Fed decision on 16 December it is time to look at the current economic situation and the potential market impact of any action that the Fed may (or may not) take.
Policymakers, including Fed chair Janet Yellen, have been talking about increasing US interest rates for some time now, and considering strong growth in the US economy and the steady fall in unemployment, the central bank would have justification to do so.
Ms Yellen is concerned that if interest rates stay at record lows for too long it could lead to another credit bubble, and if rates aren’t hiked now it could lead to several hurried hikes next year. Most traders are anticipating an interest rate hike and the Fed will not have to worry about a major reaction from the markets should they increase rates.