Market remains sceptical on Fed timing

Janet Yellen stated on Friday “I expect that it will be appropriate at some point later this year to take the first step to raise the federal-funds rate and thus begin normalizing monetary policy”. Yet this CME tool (VIEW LINK) highlights that Fed Fund futures are pricing a 14% probability of a rate hike in Sep and 50% in Dec. This is symptomatic of investor uncertainty that the Fed will deliver on a 2015 tightening. In his most recent report to investors (VIEW LINK) Kerr Neilson from Platinum Asset Management said, “far from fearing a rise in the federal funds rate, which has been suppressed at 0.1% for six years, we are fearful of the Federal Reserve Bank losing credibility as it loiters with indecision”. The market needs a clearer 2015 roadmap from the Federal Reserve.