The US Federal Reserve is to delay raising US interest rates until next year, a Morgan Stanley index showed on Tuesday.
Greece’s struggle to stay in the eurozone along with plunging prices for Chinese stocks and commodities globally are all threatening to slow global economic growth.
The IMF reiterated its view that the Fed should wait until the first half of next year to act.
The US central bank will not increase borrowing costs until the first quarter of next year, according to the Morgan Stanley index, which is based on an analysis of futures trading.
As recently as last month, the gauge projected a shift by the end of this year.
The Fed was scheduled to issue the minutes of its June 16 and 17 meeting in Washington yesterday.
“Greece has been a headache,” Meritz Securities Co head of investment management in Seoul Park Sung-jin said.
“The timing of the Fed rate increase will be postponed. The situation helps the [US] Treasury market,” Park said.
The benchmark 10-year US yield fell five basis points to 2.21 percent as of 6:55am in London yesterday, according to Bloomberg Bond Trader data. The price of the 2.125 percent note due in May 2025 rose 14/32, or US$4.38 per US$1,000 face amount, to 99-1/4.
US government debt has returned 0.6 percent this month after tumbling almost 2 percent during the previous three months, based on the Bloomberg US Treasury Bond Index.
European leaders set a Sunday deadline for Greece to accept a rescue, saying otherwise they would take the unprecedented step of propelling the country out of the euro.
The Shanghai Composite Index plunged as much as 8.2 percent yesterday over concern that Chinese government measures to stabilize equities are failing to stem a three-week rout. The gauge has tumbled about 30 percent since a peak last month.
The Bloomberg Commodity Index fell to the lowest level since March.
Mirae Asset Global Investments Co was not ready to rule out the Fed acting this year.
The US economy is strong enough to justify an increase as soon as September’s meeting, said Will Tseng, a portfolio manager for the company in Taipei.
“The US fundamentals are still healthy enough for the Fed to tighten policy,” Tseng said.
Policymakers have kept their benchmark, the target for overnight loans between banks, in a range of zero to 0.25 percent since December 2008. The way things are going, the rate might be staying lower for longer than anyone anticipated.
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