Tue, Dec 15 2015. 01 55 AM IST

On the edge

Traders are on the edge in the days leading to what could be the first interest rate hike in the US in nearly a decade

The rupee has slipped once again. There has been a rout in the oil markets. Equities have had a volatile time in many parts of the world.
Traders are on the edge in the days leading to what could be the first interest rate hike in the US in nearly a decade.
It is not just a question about when US rates will rise. There is also the question of how much they could rise by in the coming years.
The financial markets have been more sanguine on this issue than the central bankers. Take a look at the level of interest rates predicted by the market for federal funds rate futures on the one hand and the expectations of the members of the Federal Open Market Committee as revealed by the dot plots on the other.
These two show the markets have been ignoring what the central bankers are saying.
The upshot: there could be a re-pricing of risk as market expectations catch up with reality.