Tags: Bokobza | Fed | rate | growth

SocGen's Bokobza: Fed Will Raise Rates Twice This Year

By    |   Friday, 03 April 2015 08:20 AM

While traders in the federal funds futures market see only a 31 percent chance that the Federal Reserve will raise interest rates twice this year, Alain Bokobza, head of global asset allocation at Societe Generale, thinks economic growth will be strong enough to make that happen.

"You have an economy in the U.S. which is running on trend 3 percent" growth, he told CNBC. "We believe the Fed must very gradually, very slowly [act], but the Fed must exceed the zero rate policy.

"Two rate hikes is very little," Bokobza added.

The Fed has kept its federal funds rate target at a record low of zero to 0.25 percent since December 2008. Many economists expect it to begin lifting rates in September.

Economic growth totaled 2.2 percent in the fourth quarter of 2014 and likely shrank to 1.5 percent last quarter, thanks to the wicked winter weather, Bokobza noted.

But he expects a surge to 5 percent in the second quarter, accompanied by higher inflation. Consumer prices were unchanged in the 12 months through February.

"Your negative inflation readings will become much more positive in six to 12 months, and the Fed knows it," Bokobza stated.

Meanwhile, Steve Beaman, chairman the Society to Advance Financial Education, told Newsmax TV that the Fed is much more responsible for our recovery from the Great Recession of 2007-09 than President Obama.

"The vast majority of the credit for our recovery has to go to the Federal Reserve, external of the government," Beaman said on the network's "MidPoint."

"After the financial collapse of 2008 and '09, [former Fed Chairman] Ben Bernanke in a very controversial move did the opposite of what they did in 1929. He opened the floodgates for money."

In addition to keeping interest rates near zero, the Fed has pushed its balance sheet to $4.5 trillion through quantitative easing.

"That has been the core reason we've had economic growth," Beaman said. The economy has expanded about 2.2 percent a year since the rebound began in June 2009.

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While traders in the federal funds futures market see only a 31 percent chance that the Federal Reserve will raise interest rates twice this year, Alain Bokobza, head of global asset allocation at Societe Generale, thinks economic growth will be strong enough to make that happen.
Bokobza, Fed, rate, growth
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2015-20-03
Friday, 03 April 2015 08:20 AM
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