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No light at the end of the tunnel

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USA Fed Fund Rate- July 05,2016:who/baby.jpg We kept this picture since then and predicting " No hike " . and warned that the bank rate hike in baby steps towards 2% was just based on the theory of improving the market expectation . Another month is over and people are waiting for the September hike , we do not expect that would be possible, it will be hardly a wise time to fiddle around with Fed rate and rub salt into the wound ..

However, after almost a year of " waiting" for the next rate hike that did not materailse , we can reach the following conclusion. " the expectation that there will be and increase in the rate rules out completely the expection of a cut in the rate... ". Therefore it is fair to say, using the theory of creating positive expectaion of " Rate hike " helped to keep the market expectation alive supported by the media "Chances the U.S. Federal Reserve will raise interest rates in next month have shot up , according to a Reuters poll that showed economists are more convinced a move is on its way despite weak inflation and wage growth" or "Several Fed officials have recently suggested the economy is nearly ready for higher rates"..... .Surprisingly , the market expected a "hike not a cut " in the rate every month and still. read the news at the news section.

See you around Christmas time

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The Fed has raised the interest rate a quarter percentage point only since 2015 . While the Fed promised to increase the rate in baby steps to 2.5 % by end of 2016. How on earth will the Fed can raise the rate by two and a half percentage points during a recession ? However, we must admit , that it worked in creating more stability. The Fed wanted the market to expect " growth" and they succeeded .After 23 press conferences managed not raise but keep the market expecting a raise..... The market improved and Fed-funds futures, used by investors to bet on central-bank policy, has increased, and the odd for an increase in december is now 59% but for us it is still zero.

Update Nov 3,2016

The Fed this week did not look for any reason for not increasing the rate in baby steps... they declared that "The Personal Consumption Expenditures index",a measure for inflation, increased only 1.2% in September from the year before.They target an inflation rate above 2%, to consider a change in the Fed fund rate . They just left the rate as it was in 2015 and wished all a merry Christmas.

The next meeting in December will be the last opportunity for officials to raise rates in 2016. which is now very doubtful, but as usual the media rekons that a achance of 73% for the Fed to increase the rate December.