Tags: Roubini | Fed | rates | economy

Roubini: Fed Will Likely Start Raising Rates Around Mid-2015

By    |   Tuesday, 11 November 2014 10:46 AM

Economist Nouriel Roubini of New York University is part of the consensus that the Federal Reserve will begin increasing interest rates around the middle of the next year.

While he believes the U.S. economy will grow 3 percent in the next year or so, compared with 3.5 percent for the third quarter, the rest of the world will slow down, pushing the dollar up and creating headwinds for the U.S. economy, Roubini tells CNBC.

"That implies the Fed will start raising slightly later and slower than otherwise expected. It could be sometime in the middle of next year. It could be June, it could be July," Roubini said. "It depends what happens to the dollar and the rest of the world."

The Fed wants to make sure the economy is strong enough to withstand a rate hike before it moves, he said.

"Even if growth, inflation and employment data are at the right level to start hiking, the Fed would like to wait a little bit longer just to make sure that if they start hiking, they're not going to have to abort and go back to zero, because otherwise they lose their credibility. There'll be a hard landing of the economy. So better be safe rather than sorry."

While he is known as Dr. Doom for his predictions before the financial crisis, he says, "I've never been 'Dr. Doom.' When things were terrible, I was the first one speaking about it. Always am 'Dr. Realist.' I think every day you have to try to figure out this world and be right, not pessimist or optimist."

But Charles Lieberman, chief investment officer at Advisors Capital Management, says the central bank is withdrawing its stimulus too slowly.

The unemployment rate registered 5.8 percent in October, a six-year low. "The Fed has said the unemployment rate is going to 5.5 percent by the end of next year," he tells Yahoo.

But the rate is "headed down at a pretty rapid clip, it's going to get there way ahead of the Fed, perhaps even in the spring of 2015."

And yet no rate hikes are expected before mid-2015. "What happens when the unemployment rate gets to 5.5 percent, and they are still close to zero?" Lieberman asks. "It shows they are way behind the curve, and so they will have to catch up. That's going to scare the market."

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Economist Nouriel Roubini of New York University is part of the consensus that the Federal Reserve will begin increasing interest rates around the middle of the next year.
Roubini, Fed, rates, economy
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2014-46-11
Tuesday, 11 November 2014 10:46 AM
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