US Fed divisions and rising inflation fuel rate hike uncertainty, says economist
Economist Abdullah Al-Nasser says divisions among Fed members and surging inflation are increasing uncertainty over future US interest rate moves.
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Economist Abdullah Al-Nasser said the US Federal Reserve’s decision to keep interest rates unchanged for a fifth consecutive time at 3.75% coincided with signals that are increasing uncertainty in the markets, noting that three Fed members were divided for the first time since 2016.
Al-Nasser told Al-Ekhbariya TV that the removal of "forward guidance" has reduced investors’ ability to anticipate the Fed’s next moves, while shortening the Fed’s statement to less than 150 words has made monetary policy less clear.
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The economist explained that 30-year bond yields have reached their highest level in 17 years, reflecting rising risks, and noted that bond market movements suggest a decreased likelihood of a rate hike in September.
He added that inflation rising from 3.5% to over 4% increases the chances of an interest rate hike at the next meeting.