New | Fed interest rate timing still unclear but most experts tip further China rate cuts and devaluation of yuan
Fed decision this week 'close call' but experts see further Chinese rate cuts and yuan devaluation
Bankers and economists have mixed views over whether the US Federal Reserve will raise interest rates this week but most believe China will cut rates and devalue the yuan further this year.
CLSA equity strategist Christopher Wood yesterday said he does not expect the US to increase interest rates at the Fed meeting this week as he does not believe US economic conditions support a rate rise.
The Fed will meet on Wednesday and Thursday to decide on the timing and the quantum of an interest rate increase.
"Fed chairwoman Janet Yellen does not favour raising rates," he said at the annual CLSA investment conference in Hong Kong. "I do not think the US will increase the interest rate this Thursday or this year."
Wood pointed out that the consumption and inflation figures in the US are not good enough to support a rate rise as the US quantitative easing programme since 2008 has only propped up asset prices rather than the economy.
But Wood said he expects more interest rate cuts in China and the yuan to devalue a total of 5 per cent this year as the currency becomes more market-driven to fit the criteria for its admission into the International Monetary Fund's exclusive club of reserve currencies.
Simon Cox, investment strategist with BNY Mellon Investment Management, said there is no urgent need for the Federal Reserve to raise interest rates this week given the recent drop in unemployment rate does not paint a picture of a robust recovery in the US labour market. A more feasible time for a rate increase might be December, he said.
