Concerns Over Interest Rate Hike, Falling Oil Worries Investors

rtGlobal equities are facing selling pressure on Tuesday morning as oil is trading near a five year low and a recent article published from the Wall St. Journal late on Monday has put some uncertainty into the market after it was suggested that Federal Reserve Committee members from the U.S. Federal Reserve might be considering to prepare the market for a short term interest rate hike in 2015.

According to the Dec 8th WSJ article written by John Hilsenrath, Fed members are considering to “shift their tone at their policy meeting next week” and drop their past reference to holding short term rates near zero percent “for a considerable time” that was first communicated since March and has proven to be a challenge to interpret for a market that has grown accustom to low interest rates to help stimulate growth since December 2008 during the global recession.

Next week the Federal Reserve will hold their final Fed meeting for 2014.

Some economists believe that is the right time to begin preparing the market for a short term rate hike in 2015 now that the Fed’s quantitative easing program has ended and the U.S employment picture is showing steady signs of stabilizing.

Last week the U.S. Labor Department reported that the U.S. economy added 321,000 non-farm payroll jobs, the largest gain since January 2012, while the unemployment rate held steady at 5.8 percent.

Over the past 12 months, the average monthly gain of non-farm payroll jobs has been 224,000 and average hourly earnings grew by 2.1 percent.

The consensus view is for the Federal Reserve to begin increasing rates in mid 2015.

Fed Chair Janet Yellen will hold a press conference after the policy meeting ends on December 17th and likely address the topic of the Federal Reserve raising interest rates.

-Johnathan Schweitzer

 

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