Chase Economist Says No Way Fed Hikes 4 Times in 2016

The Federal Reserve has suggested it will raise interest rates four times this year, but market participants aren’t buying it — nor should they, Chase Chief Economist Anthony Chan said Thursday.

The Fed refrained from tightening monetary policy last September in part due to stress in overseas markets and China in particular, Chan noted. As Chinese stock market volatility and the country’s currency depreciations roil equities around the world once again, central bankers are poised to tighten policy less aggressively than indicated following the Fed’s initial rate hike in December.

“The situation has now reverted back to China, so I think the Federal Reserve goes back into its September [mode] and doesn’t raise rates by four times,” he told CNBC’s “Squawk Box.”

For that reason, the U.S. 10-year Treasury yield shouldn’t exceed 2.5 percent by the end of 2016, he added. On Wednesday, the U.S. 10-year yield hit a more than two-month low of 2.042 percent.

Many people believe the United States has decoupled from China, Chan said, noting that trade links between the two countries are not “huge.” But he cautioned that a Chinese economic collapse, while unlikely, would create problems in global financial markets.

“China has huge trade relationships with a lot of other emerging economies, and so if China goes down, it hurts the other emerging economies, and pretty soon when you add up all those other emerging economies, it adds up to a significant part of the global economy,” he said.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza