Monday, September 21, 2015
Financial market snapshot September
Why are financial markets so scared about a quarter percentage point increase of the Federal Funds Rate? Because the hikes would not stop at + 0.25, but mark the beginning of new cycle of rising interest rates that may reach three or four percent just as its "normal" level. However, as there has been an overshooting downwards, there will also be an overshooting on the way up. When will the Federal Funds Rate reach five or six percent or even more? That is the question that troubles the markets. Financial market operates are scared because an interest rate back to normality of 3 to 4 percent would already imply an asset price contraction of 75 percent.