Markets have been informed of every upcoming interest rate hike by the Federal Reserve. The Fed’s officials systematically prepared investors for this event in order to prevent excessive volatility.
According to MarketWatch, this is no longer justified.
The Fed's December rate hike roiled the market so that the whole point of market preparation has become useless. Currency strategists at Bank of America Merill Lynch say that now is the time for changes.
However, the Fed never raises rates in case market expectations are below 60 percent. But still, this is contrary to the statements of the regulator that the interest rates hike may take place at any meeting.
Theoretically, the Fed’s measures minimize volatility, but raising rates unexpectedly could break the vicious circle.
Speaking of current expectations, it is a zero chance of a rate increase. According to the CME Group's Fedwatch tool, the current implied probability of a hike is at zero, 22 percent at the April 2016 meeting, and 47 percent at the June 2016 meeting. The odds of a rate increase above 60 percent are only at the September 2016 meeting.
The Fed will announce its decision on March 16. But the Federal Open Market Committee is unlikely to lift rates now as market volatility is already too high.
Many are wondering whether the Fed would ever want to astonish the market. Some economists believe that the US regulator is meddling with Wall Street's biggest banks.
First of all, the Federal Reserve has to regain control over the market as now banks determine the central bank’s decisions.
