Tags: S&P | David Blitzer | Federal Reserve | Rate Hikes

S&P's Blitzer: Unpredictable Fed Rate-Hikes May Spark 'Substantial Pullback'

By    |   Tuesday, 05 May 2015 12:53 PM

Global sentiment could be harmed if the Federal Reserve beings to hike interest rates too quickly and embarks on an unpredictable schedule, warns David Blitzer, chairman of the index committee at S&P Dow Jones Indices.

He told CNBC Tuesday that the initial rate boost by the Fed would happen, at the earliest, near the end of this year.

"The pace has to be slow and the real question is not the timing of the first one...but the timing of the second one," he said.

"If they come pretty close together let's say two consecutive meetings — a lot of people are going to say: 'Oh, they're really worried about inflation, all bets are off,' and there will be a substantial pullback."

And the exact timing of the Fed’s first rate hike since June 2006 is the subject of much speculation.

Chicago Fed President Charles Evans said Monday that rate hikes could begin this year without harming the recovery.

"My preference would be that we not raise rates until we're confident that we are going to see rates rise, and those rate increases be clearly in train," he said.

"However having said that, it is the overall stance of monetary policy over a longer period of time that will ultimately be determinative, so a properly shallow path of increases, even if we were to increase rates sooner than I would like, could still be quite supportive of continued strong economic recovery, hopefully continued increases in inflation."

Legendary investor Warren Buffett believe the Fed will remain cautious about raising rates.

That's partly due to our sluggish economy — GDP grew only 0.2 percent in the first quarter — and partly due to the negative interest rates prevailing in most of the eurozone, he tells CNBC.

"I think it would be very hard for the Fed to bump rates up here with negative rates in Europe," Buffett explains. The 2-year German government bond yields recently were at negative 0.23 percent.

Other experts have been cautioned not to read the tea leaves about the timing of a rate hike.

New York Post columnist John Crudele believes "Fed chief Janet Yellen ripped up the calendar Wednesday vis-a-vis a rate hike after the (recent) two-day Federal Open Market Committee meeting."

The Fed dropped its forward guidance in the statement late last month.

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Global sentiment could be harmed if the Federal Reserve beings to hike interest rates too quickly and embarks on an unpredictable schedule, warns David Blitzer, chairman of the index committee at S&P Dow Jones Indices.
S&P, David Blitzer, Federal Reserve, Rate Hikes
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2015-53-05
Tuesday, 05 May 2015 12:53 PM
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