PA ANALYSIS: Will Fed rate rise be a one hit wonder?

There appears no way back now that Janet Yellen and her Federal Reserve colleagues have all but committed to raising rates on 16 December, and a quarter point rise is largely priced into markets already.

PA ANALYSIS: Will Fed rate rise be a one hit wonder?

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Even when energy and food are stripped out to leave ‘core inflation’ the reading is only 1.3%, well beneath the Fed’s 2% target. This undermines the argument that prices are largely being held down by the ongoing slump in oil.

The oil price looks likely to stay around the current low level for some time to come anyway, and if anything it seems more likely to slip further than rebound with OPEC showing more signs of fully unravelling.

If the December hike combined with falling or flat oil prices chokes off even this meagre growth in prices it is hard to see how the Fed could go ahead with a second rise.