Stephen Stanley, chief economist at Amherst Pierpont, said the timing for the Fed to move is right. He said Fed officials should extend out their forecasts for interest rate rises if they don't hike. "But they have to try to offset that somehow. The truth is they probably wanted to go in September, but they may not because markets are volatile," Stanley said, adding the Fed would not use the markets as an excuse. "They can't do that or they hold themselves hostage to market volatility."
"I don't see what they buy themselves by waiting," he said. "If they're going to wait until financial markets calm down, that's an open-ended proposition. What if financial markets are more volatile in October than they are in September. I think they run a risk by not taking the opportunity to get going here," he said. If it does not hike, Stanley said the Fed would not say it didn't raise rates because of financial volatility, but it could say downside risks are greater because of weakness in the global economy.
Mark Luschini, chief investment strategist at Janney Montgomery, said the 2 percent rally in the S&P 500 on Tuesday and Wednesday was driven in part by traders betting the Fed would not raise rates as well as a rally in energy. He does not expect a rate hike, but says stocks would sell off if there was one. "I think it's unlikely but not implausible," he said. Luschini pointed to weaker CPI inflation data Wednesday as being among the reasons stock traders think the Fed could hold off.
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