Investment Strategies
Lombard Odier Asia-Pacific CIO Warns That US May Not Raise Rates This Year
The US Federal Reserve may not necessarily put up interest rates this year, as a number of forces at work may weaken the case for a hike in 2015, according to the Asia-Pacific chief investment officer of Lombard Odier, the Swiss private bank.
The US Federal Reserve may not necessarily put up interest rates
this year, as a number of forces at work may weaken the case for
a hike in 2015, according to the Asia-Pacific chief investment
officer of Lombard
Odier, the Swiss private bank.
Jean-Louis Nakamura’s views contrast with those of many other
CIOs who have been talking about when, rather than if, Fed chair
Janet Yellen will push the button for higher interest rates in
2015.
The Lombard Odier man argues that there is still considerable
slack in the US labour market and he sees no serious cost
pressures there either. Additionally, the US dollar’s recent
rapid appreciation is already doing some of the Fed’s work in
tightening monetary policy.
He argues that his view on what the Fed will do does not directly
hinge around incoming US gross domestic product data. Nakamura
says GDP will accelerate in coming months – preliminary figures
for US GDP were hit by falls in the oil price while the positive
effects of weaker oil for US consumers and other sectors will
take longer to feed through.
US gross domestic product grew by 2.6 per cent in the fourth
quarter, compared with the 5 per cent space seen in the
summer.
“My view on the Fed is much more related to the fact that US
dollar is doing already part of the job, there is no sign of wage
induced inflation (of course it could change in case of a rapid
acceleration of US GDP but the huge reserve of labour
participation might temper this), inflation expectations may fall
further and finally - and most important - it would be incredibly
risky for the Fed to tighten at the precise time when almost
the whole global economy is switching into negative nominal
yields,” he told this publication.
Lombard Odier, a firm operating in Asia for 25 years, has client assets of $238 billion (as of 30 June 2014).
