So what about U.S. interest rates?

There is no shortage of people speculating about what is going to happen with regard to the U.S. interest rate hike situation so I figure I may as well through my 2c into the pond as well.

The way I see it is that the Fed had said that they are looking at two major factors before they can increase interest rates. These are (paraphrased of course);

1. a reasonable expectation that inflation will reach 2% within 12 months

2. full employment in the economy

So addressing these:

1. Now ok, we know that inflation in the U.S is rather stubbornly low, although we have been seeing it creep up the page a little. Lot's of mixed data coming out in terms of PPI and CPI and so on, although it does seem that the current near zero interest rates is and has been allowing consumers to spend like there is no tomorrow. I am no expert on this but I think that if nothing changes, within 12 months we could see 2% inflation in the U.S.

2. We've seen that Non-Farm Payrolls came out much lower than what was expected for the month of August. We also saw that Unemployment Claims came in lower than expected for the month of August. So what this is telling me is that fewer jobs are being created, but at the same time less people are unemployed. Sure you will never be able to get completely 100% rid of unemployment, but what it looks like is that the U.S. economy is approaching full employment.

So taking these two factors into account, I would say that we are likely to see a 0.25% increase in interest rates when the Fed makes their announcement later this month.

That's my 2c.

@TraderPetri