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Banking powerhouse accuses Fed of misleading Americans

William Rhodes, a retired senior vice chairman and senior international officer at Citigroup and Citibank, urged the Federal Reserve to make a move on interest rates, saying that the agency has “misled people” with their indecisiveness.

“Every governor in the Fed feels they have to have a press conference once a month. And obviously, they don’t agree. You have all sorts of opinions on the table, which confuses the markets. And so I think one of the problems here has been the bad communications out of the Fed. Because they really, I think, misled people,” he said during a special event hosted by accounting firm, Eisner Amper, last week.

For the past few months, officials have indicated that they may raise interest rates when the Fed holds its final meeting of the year in December.

William Rhodes
William Rhodes

The idea behind the move is to slow down future inflation, allowing the cost of borrowing to return to pre-crisis levels. The last time the Fed raised interest rates was in 2006. More than two years later, as the global financial crisis shaved hundreds of thousands jobs from the economy, the agency started a trend of keeping its benchmark interest rate near zero percent.

Last October, Fed officials decided to keep the status quo after a two-day meeting. The agency made the decision as global markets remained volatile and growth trudged along, making it unclear whether the economy can take the hit.

Rhodes, a respected expert on international financial diplomacy and the author of Banker to the World: Leadership Lessons from the Front Lines of Global Finance, is unsure on when the Fed will raise rates. However, he called on authorities to “make up their minds.”

“I think it’s still 50/50 whether they’re going to move in December. They really have to make up their minds what they want to do. And then just go ahead and do it one way or the other,” he said.

“There’s all this talk from emerging markets, (their) finance ministers and central bank heads, they say, ‘Bill, please tell your friends on the board of the Federal Reserve that instead of giving all these diverse opinions, make up their minds of they want to raise rates or if they don’t to raise rates. We’re the ones suffering.”

If the Fed raises rates in December, it may turn out to be good for stocks. According to a note from J.P. equity strategist Mislav Matejka, an interest rate hike may indicate sustainable strength in the market.

“If the Fed does hike in December, this should be interpreted as a conformation that improving sentiment is sustainable, in our view, and should be a positive for equity markets,” Matejka said.

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