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The humdrum of an increase in US interest rates in September 2015 has now unfolded. Respecting Uncertainty did reflect a similar outcome. I am now questioning the logic of the masses pertaining to the good old quote; “Fool me once shame on you, fool me twice shame on me”.

There is still a main stream expectation for an increase in interest rates as we close into 2015. But I am yet not convinced of this happening; mainly due to the upcoming US Presidential election in 2016. If anything, I am looking forward to QE4 (2016?) with a statement from the Fed reserve stating that the economic numbers have yet not got up to mark as expected but the US economy is getting there(where?).

Taking a look at the seasonality of an increase in interest rates in pre-election years for the months of October and December (FOMC Interest Rate Decision-October 28th & December 16, 2015).

Pre-election year 1971, October & December– No change in interest rates

Pre-election year 1975, October & December– No change in interest rates

Pre-election year 1979, October & December– Decrease through the months

Pre-election year 1983, October & December-Lowered in October, unchanged in December

Pre-election year 1983, October & December– Lowered in October, unchanged in December

Pre-election year 1987, October & December– Lowered in the weeks after October 19, unchanged in December

Pre-election year 1991, October & December– No change in interest rates

Pre-election year 1995, October & December– Unchanged in October, lowered in December

Pre-election year 1999, October & December– No change in interest rates

Pre-election year 2003, October & December– No change in interest rates

Pre-election year 2007, October & December– Interest rates lowered

2009 onwards rates remained the same as today.

From the above, the probability of an increase in interest rates historically in a pre-election year (October & December months) is bleak.

Simultaneously, also keeping an eye on any trigger event that could come in the form of change in economic policy pertaining to the financial system as a whole; the first indication to an increase in US interest rates. Discussions of which I wouldn’t be surprised have been initiated in the recent UN’s General Assembly gathering in New York, USA- a geopolitical event.

 

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