Agony for Wall Street Economists, Investors as Fed Meets

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An eagle tops the U.S. Federal Reserve building's facade in Washington, July 31, 2013. REUTERS/Jonathan Ernst
An eagle tops the U.S. Federal Reserve building's facade in Washington, July 31, 2013. REUTERS/Jonathan Ernst
REUTERS/Jonathan Ernst

By profit.ndtv.com

Wall Street’s top economists are on unfamiliar ground: as the Federal Reserve decides whether to raise interest rates, for the first time in years they are deeply divided on what will happen.

Some observers of the world’s most powerful central bank, which will announce its decision on Thursday, blame the Fed for being unusually enigmatic and sending mixed signals. Is it truly “data-dependent” or has it been swayed by the recent China-induced market gyrations?

“I joke to colleagues, do I still have a job on Friday if I get it wrong on Thursday?” says Citigroup’s William Lee, adding that no, his pay will not be cut if he blows the call.

Citi goes with a Fed hike and Lee said that investors read research from banks to “stress test” their positions; for that reason, even if he is right that the Fed raises rates but gets the why wrong, “I’m embarrassed.” If he gets the rate call wrong, he will dissect what he might have missed.

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