Citi are still looking for a September Federal Reserve rate hike. This is despite a lot of others pushing back their calls in response to the recent market turmoil
(for example: Barclays gets scared by the market and knocks back Fed hike expectations)
Citi is not moved, though. Comments from William Lee, MD & head of North America Economics says its because of the concerns over financial stability that has tipped the scales in favour of the Fed hiking in September.
Citi, does add though, events to watch for that may cause them to change their call:
- Further deterioration in China, at present developments there are not enough to move the Fed away from September
But it is Federal Reserve Vice Chair Stanley Fischer speaking at Jackson Hole (this weekend) that's the "key wild card"
If he shows signs of worrying that the transitory downward pressures (commodity and energy prices and the appreciating dollar) are feeding through and becoming entrenched in wages and domestic prices" ... that would be a big sign of September hike ... "His concern would suggest reduced confidence in reaching the Fed inflation target in the medium term."
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More from Citi:
Say to expect a September hike even if August payrolls are 'soft'
- "markets are acutely focused on the strength of the August payroll report as the last, and most important, piece of new information shaping the Fed's September policy decision. Will the report show enough labor market improvement and assuage concerns about low inflation? How will it set the tone for the Fed meeting?"
- Say the are expecting +190K, which does not indicate a slowing the pace of labor market improvement, and shouldn't be an impediment to a hike in September
