Traders in the futures market are already pricing in just two rate increases in the coming year, half of what economists forecast.
Differing Views
The turbulence unsettling financial markets worldwide has already become a source of debate for policy makers.
At the Kansas City Fed’s annual conference in Jackson Hole, Wyoming, St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester said that they consider the U.S. economy to be strong enough to raise interest rates.
Fed Vice Chairman Stanley Fischer said “it’s early to tell” whether recent market swings would change the likelihood of a rate increase next month, while New York Fed President William Dudley said on Aug. 26 that the turmoil made a September increase “less compelling.”
Those shocks have already swayed strategists at JPMorgan Chase & Co., even as the bank’s economists stick to their forecast for rates to rise next month.
On Friday, the fixed-income strategy team cut its year-end estimate for the effective fed funds rate to 0.4 percent, indicating one increase by the central bank, from 0.6 percent, which suggested two.
“It’s a global story,” said Jay Barry, a U.S. fixed-income strategist at JPMorgan.