Be prepared for market change after US interest rates rise: RBA

The rise in U.S. interest rates has been estimated by the Reserve Bank of Australia, or RBA, prompting the organisation to warn the public to be ready to deal with the changes.

RBA Assistant Governor Guy Debelle said on Wednesday that the U.S. rate of interest is likely to rise. “This is the most well telegraphed rate rise in the history of rate hikes,” he said. He added that if people are not ready for the change, then they will suffer financially.

The Federal Reserve is going to announce rate rise after a two-day meeting to be held on Thursday. The September policy meeting of the Federal Reserve will end on Friday morning (AEST). Debelle believes that there might be fluctuations in the global financial market as soon as the rate is hiked. People informed prior to the rise will, however, be able to deal with the situation properly.

He would have been more surprised if the process completely lacked volatility at the time of rising prices, Debelle told the Actuaries Institute Banking on Change Seminar held in Sydney. He said that whenever the U.S. rate of interest rises, things start settling down following the event. However, people have been warned earlier this time, which will make it easier for them to get ready for the financial upheaval.

The RBA official also reminded that it was in 2008 when the U.S. rates increased. Therefore, it might be difficult for some people to deal with it. “There’s a decent chunk of people in the market that have never experienced an environment where rates actually go up and most of them have never experienced an environment where rates actually change,” he told AAP .

The U.S. bond returns on Tuesday night promptied significant rise in their level, which seems more than the yields recorded in the past four years.

The 12-member Federal Open Market Committee, or FOMC, think that the rate decision will be a close one. The committee holds an eight-fold meeting every year to decide on U.S. interest rates. It is concerned with setting targets for the Federal Funds rate as well as the key rate of interest between commercial banks, thereby affecting the cost of borrowing globally.

“There hasn’t been this much debate, uncertainty and division for a FOMC meeting in years,” BK Asset Management MD Kathy Lien said.

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