InvestmentsNov 20 2015

Investec economist says rate fears aren’t justified

Search supported by
Investec economist says rate fears aren’t justified

If the economy continues to do quite well and unemployment continues to fall the Fed will probably start raise rates in December. according to Philip Shaw, chief economist of Investec.

Speaking to Money Management’s Spriha Srivastava, Mr Shaw said the Fed did not raise rates in its September meeting and that was specifically because of the uncertainty in financial markets globally, particularly stemming from China.

Since then, he said markets have stabilised significantly and individual members of the body that sets interest rates in the US have said that it is probably appropriate to raise rates in 2015.

In the latest FTAdviser video interview, Mr Shaw said: “Our expectation is that we will probably see something right at the end of the year but of course that is subject to events, subject to no further major market volatility and – of course – signs of a slowdown in the US.

“Our own view of America is that if the economy continues to do quite well, unemployment continues to fall and therefore the Fed will probably start raising rates in December.

“In terms of emerging markets we might see a little bit of financial volatility because of the uncertainty.

“The key point is that when rates start to rise, they are going to rise very slowly and therefore the worst fears that markets might have had in different interest rate cycles about sharp increases in rates wouldn’t be justified.

“I think that developed markets can weather the storm pretty easily. Emerging markets, I think again, I’d be a little more cautious, particularly on those emerging markets that are dependent on raising funds by borrowing dollars so it is not great for emerging markets but I think that developing markets will be able to – as I say – weather the storm.”