Citi Researchers Speculate On Next Interest Rate Move
The Brexit vote caught nearly all economists and traders off guard. But now that it appears the Brexit will be a reality, the major question is how it will impact global economies.
In the United States, fears of a potential Brexit certainly played a role in the Federal Reserve’s decision not to raise interest rates in June. Prior to the Brexit vote, the futures market was predicting roughly a 50 percent chance of another U.S. rate hike by the end of the year. Earlier this week, that percentage had plummeted to around 15. Some economists are now calling for the next Fed move to be a rate cut instead of a hike.
According to Citi analyst William Lee, investors can expect another Fed hike by the end of 2016, but just barely.
Citi is now calling for the next rate hike to happen in December.
“The Brexit vote amplifies uncertainty with unprecedented economic and political considerations whose impact on global economic activity is difficult to discern,” Lee explained.
Despite the steep initial drop in the U.S. stock market on the Brexit news, Lee noted that the selloff was significant but orderly.
Since news of the Brexit vote broke, the iShares Barclays 20+ Yr Treas.Bond (ETF) (NASDAQ: TLT) is up 5.5 percent.
Disclosure: The author holds no position in the stocks mentioned.
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