Is The Fed bluffing on interest rates?

Increasingly the market is beginning to ask the above question. For too long now it feels that it has been led on a merry dance regarding the timing of the first interest rate rise. The market has been predicting The Fed will start the process of 'nomalising' monetary policy for a very long time now. At its recent meeting Fed chair Janet Yellen dropped the word patient from its interest rate outlook causing a mini frenzy that we were about to witness a rate rise imminently. However, close obervers noted that she also stated that the removal of the word patient did not therefore mean that The Fed would be impatient.

We believe that The Fed has been playing a game of cat and mouse with the market. We suspect that under current circumstances - a record high dollar, falling inflation, weakening global economy - they have no intention of normalising rates. We would not rule out a small one off rate rise to keep everyone honest - even if this would create a lot of damage.