China, Greece won't stop the Fed from hiking rates: Fidelity
Instability in Greece and the huge downturn in Chinese stocks have traders wondering if the Fed will raise rates by year’s end as expected. However, one strategist says a hike still remains very likely in 2015.
The markets are priced for a 200 basis point increase – or a move from 0% to 2% – in the fed funds rate, according to Jurrien Timmer, global macro director at Fidelity Investments. The Federal Reserve has kept that rate at around 0% since the end of 2008.
“Whether they start in September or December for me is a moot point,” he said. “They want to declare victory and get off of 0% because we really don’t belong at 0% anymore. The crisis was 6 years ago.”
Timmer doesn’t see events in Greece changing the Fed’s likely course. Unlike 2011, when Greece’s payments were due to financial institutions, a large portion of Greece’s debt is now in the hands of Eurozone countries, the European Central Bank, and the International Monetary Fund. That, in combination with the ECB’s quantitative easing policy, will keep Greece’s problems at bay, according to Timmer.
Get the Latest Market Data and News with the Yahoo Finance App
“This will be a passing storm and that the Fed will still be on track later this year to start hiking rates,” he predicted.
To be sure, the market no longer anticipates a September liftoff, Timmer said, and it is becoming less certain that a rate hike will happen as early as December. But he sees other variables as being more important than mere timing.
“It’s a question of how fast and to what level,” said Timmer. “Those are really the key variables. Nobody really knows the answer to that, including the Fed. That’s why they’re saying, 'We’re data-dependent. All we know is we’re going to lift off and we’re going to take it from there.’"
More from Yahoo Finance
These are the market's bright spots right now: Strategist
