It is always possible that the Fed could surprise us with an unexpected rate hike next week, but we very much doubt that will happen, it just doesn’t fit Chair Janet Yellen’s more cautious style. At this stage it would also be a big shock too, with the October fed funds futures contract putting the odds of a September rate hike at only 22%. Given the uncertainty surrounding the prospects for a pick-up in GDP growth in the third quarter, particularly in light of the latest deterioration in the survey evidence, it makes a lot more sense to wait until December before pulling the rate trigger.
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