Fed should rethink the need for an interest-rate hike this year

THERE is a school of thought that feels the US Federal Reserve should have raised interest rates at its Federal Open Market Committee (FOMC) meeting last month instead of leaving markets to buckle under the worry over when the first hike might occur.

Since the end of that meeting on Sept 17, all equity markets including Wall Street have undergone severe corrections. The pro-hike camp suggests that since September was a missed opportunity, rates must be raised at either the October or the December meeting of FOMC.

On balance, this would be a mistake. Interest-rate hawks say the Fed unnerved markets by making two comments about non-domestic factors in its September accompanying statement - "the Committee continues to see the risks to the outlook for economic activity and the labour market as nearly balanced but is monitoring developments abroad" - and the comment that before it raises rates, it will study many factors, including "international developments".