AAA-ratings fear for US to trigger 0.25% interest rate hike?

Warnings from credit rating agencies like Moody’s that the US and UK are in danger of losing their AAA ratings could be the final straw that persuades central bankers to jack up interest rates by a marginal amount this week.

An article on the financial website arabianmoney.net last week that cited senior banking sources as predicting a 0.25% rise in the Fed funds target overnight rate on Tuesday, has set pulses racing (click here).

Fed cred

But few commentators give this source much credence and the tendency is to believe the Fed and its promises of an extended period of low interest rates.

When there is a lot of activity in the market then it starts to expand. This stock pattern along with the Bollinger bands lets you look out for some trading opportunities in the market.

The Bollinger bands are used to spot a bounce in the trade. The band is made up of an upper Bollinger bad and a lower band. There is also an average band that runs along the middle. The price will always have a tendency on the original site to return back to the middle line which is the average or the mean line. The upper and the lower band are used as a resistance and support level respectively.

The higher is the technical chart time frame,

Words can always be twisted, of course. The Fed could jack up rates 0.25 per cent and still claim that it is sticking true to its word, with rates still low and expected to stay low for the foreseeable future.

The impact on financial markets would be instant. The AAA-rating would be assured and bond prices surge. Stock markets would come off their recent highs and this might be greeted as a healthy correction from overvalued levels.

Dangerous complacency

Markets dislike the unexpected but they may have become unduly complacent recently believing that emergency low interest rates are an indefinite phenomenon.

All history says otherwise if only because artificially suppressing the cost of money is inflationary and unfair to those paid low interest rates. It is also bad for government debt ratings and the government has a lot of debt to raise this year.

Standby for a shock announcement from Fed chairman Ben Bernanke tomorrow night. The fear in the market today is that China is tightening but the real gorilla in the front room might be much closer to home.