With the FOMC meeting in full swing and near coming to a close, the big discussion in the world of finance has been the Federal Reserve interest rate. Essentially, the Federal Reserve is hoping to increase interest rates by the end of the year; and many experts are expecting for that to happen by the end of September. While I've been against this idea, I think the final nail in the coffin for a delay of interest rates came out today as the US consumer price index saw declines. Today, we'll talk about the several reasons I'm not expecting to see a rate hike as well as how you can make a profit trading binary options after the decision is announced.
Why The Federal Reserve Isn't Likely To Raise Its Rate In September
As mentioned above, the Federal Reserve is in the midst of discussions with regard to whether or not to raise interest rates by the end of September. However, I don't think that will be the case. The bottom line is that higher interest rates are likely to put pressure on the US economy and markets; and at this point, I'm not sure that the economy can take such a blow. Here's why…
US Jobs – First and foremost, for the most part of the year, we've seen positivity in the US jobs report. However, August data simply wasn't as appealing. During the month of August, the United States added 173,000 jobs to the economy; a far cry from the 220,000 that was expected. However, August is historically slow for jobs growth; so, the low number wasn't the big issue. The big issue came by way of manufacturing jobs. In the month of August, 17,000 manufacturing jobs were lost. That's a big sign of concern for the US economy.
Consumer Spending – Consumer spending makes up a big piece of the gross domestic product in the United States. Therefore, this is a very important figure for economists and the Federal Reserve. Unfortunately however, while consumer spending is up slightly, it's not seeing the robust growth that would be needed in order to endure a rate hike.
Economic Conditions Around The World – Another factor that's important to keep in mind is the worldwide economy. After all, any changes made to economic policy in the United States will affect the economies of countries that are trading partners to the US. Therefore, it's important to gauge the effect of a rate hike abroad and whether or not other economies can take the pressure. Unfortunately, the worldwide economic outlook isn't looking very bright at the moment. Therefore, the damage that a rate hike would do abroad would likely lead to the next worldwide economic recession. That's something that the Federal Reserve definitely doesn't want to see!
The Nail In The Coffin (CPI) – Finally, for me, the nail in the coffin came by way of Consumer Price Index data this morning. In the month of August, low oil prices and the high value of the US dollar pushed the CPI down by 0.1%. While that doesn't seem like a big decline, it's a signal that the United States economy simply isn't strong enough to endure a rate hike.
Taking all of these factors into account, I would be shocked if the Federal Reserve did in fact decide to increase interest rates. The bottom line is that the US economy, nor economies abroad are ready to take such a big hit!
How To Profit From The Trends
Given the fact that the Federal Reserve isn't likely to raise its interest rate, we can expect to see growth across the US market throughout the rest of the week; and most likely next week. With that said, it may be a good idea to watch the Dow Jones, S&P 500 and NASDAQ for profitable call opportunities. Adversely, in the highly unlikely event that the Fed does make the decision to increase its rate, get ready to look for profitable put option opportunities. Be sure to check our latest financial news.
What Do You Think?
Do you think that the Federal Reserve will or will not increase its rate? Why? Let us know your opinions in the comments below!
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