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November 12, 2014 at 09:28 AM
Voya Investment Management experts theorized when the Federal Reserve would raise rates, predicting it would happen later rather than earlier during a media briefing Tuesday morning in New York.
“The backdrop of slow global growth, low global inflation, policy tools being very limited … and this income divide will all lead to — just my personal view — is a first-quarter 2016 tightening, earliest December 2015,” said Christine Hurtsellers, chief investment officer of fixed Iincome and proprietary investments.
Meanwhile, according to a Reuters poll, Wall Street’s biggest banks believe the Federal Reserve will raise interest rates by June.
In September, Fed policymakers said the central bank would keep interest rates low for a “considerable time” and worried that slowing global growth and a stronger dollar posed risks to the U.S. economy.
Later in October, as the Federal Open Market Committee confirmed that it would not extend its quantitative easing policies, the group noted improved conditions in the labor market that suggested the “underutilization of labor resources is gradually diminishing.”
According to the Labor Department, the U.S. economy added 214,000 jobs in October, and the unemployment rate fell to a six-year low at 5.8%.
The big question for 2015 will be, as Hurtsellers’ colleague Paul Zemsky, CIO of multi-asset strategies, said, is “how much slack is left in the labor market?”
“That means, how low can the unemployment rate go before wages start rising to the point where the Fed becomes nervous and starts raising rates?” Zemsky said.
As Hurtsellers sees it, “the fact that the income divide exists in the U.S. [and] the fact that we haven’t seen real wage growth” will make it hard for the Fed to defend rising rates to Congress.
