Since Wednesday morning, almost all television channels have been racing each other to find out what the Fed will decide to do about interest rates.
Encouraged by Trump’s harsh statements, some of the experts say, “Maybe the Fed won’t raise rates”. I, on the other hand, would like to approach the issue from a different perspective.
-Fed is quite likely to hike rates. But, we don’t’ have to take it as bad news, because a rate hike means that the US economy keeps growing. The Fed may even make bolder statements for 2019 with expectation for higher inflation in the following year. Capital Markets have already included this possibility into pricing. Given the fact that the US is the world’s third largest exporter, any rate hike by the Fed would be a morale booster indeed. Markets will need some time to adapt as there will be an upward trend in global interest rates due to US impact.
- If the Fed decides not to hike rates, this would be not because of Trump but actually because of some another situation that we currently fail to notice but which remains as a point of concern for the Fed. And this would be terrible news indeed. Fed skipping rate hike would mean that it has big concerns for the future of the US economy, which would be a real disappointment indeed especially when the US economy has recently started to gather strength.
“Structural reforms are inevitable now…”
I said the same thing in every interview I’ve given to every television channel. I also added, “We should not expect a surprise as the Fed has already prepared the necessary diplomatic basis before taking a rate hike decision”. And things have unfolded just like I expected. The Fed raised rates by 25bps.
The results of the Fed decision for Turkey can be summed up as follows:
- Funding Cost will be more expensive than ever. This means an increasing risk for Turkey.
-Structural reforms will become inevitable in order for countries with savings gap, since it’s the only way to attract foreign capital.
The only surprising news form the US is that the US forces are preparing for withdrawal from Syria. I’ll share the detail with you very soon.
