Once-unthinkable October rate boost now on Wall Street radar

NEW YORK — October is a long shot, but Wall Street is not ruling it out. Traders and investors have been betting for months that the Federal Reserve will raise interest rates in September or December. October, the only other meeting on the 2015 calendar, was not part of the conversation, mainly because there is no press conference scheduled along with the central bank’s interest-rate decision that day.

Now that may be changing for some analysts after the recent financial-market turmoil. September may be too soon, and December is problematic in the eyes of some investors because liquidity in financial markets tends to dry up at that time of year. That puts October on the radar screen.

“We have to look at it more seriously,” said Mr David Keeble, the New York-based head of fixed-income strategy at Credit Agricole. “You really want to be moving a little bit before December, otherwise your credibility starts to disappear,” said Mr Keeble, who is still projecting the Fed will boost its target next month for the first time since 2006.

The Fed has been signalling for months that it would raise interest rates this year, after holding its target near zero since 2008. The market was buying into that message until global equity markets lost more than US$5 trillion (S$7 trillion) of value in less than two weeks on expectations of slowing economic growth.

“An off-cycle hike in October is a possibility if September is too soon because of market jitters,” said Mr Greg Anderson, Bank of Montreal’s head of foreign-exchange strategy.

Fed Chair Janet Yellen holds press conferences after every other Federal Open Market Committee meeting.

Some traders see the lack of an October press conference as a dealbreaker. However, Ms Yellen has indicated that rate decisions would not depend on when press conferences are scheduled. BLOOMBERG