Mobius, a Franklin Templeton fund manager, says that there is no rate hike in sight primarily because of a pessimistic inflation outlook.
At the Morningstar investment conference, Mobius further added that in his view, the central banks have not done their homework properly regarding inflation. He went on to comment regarding the reason the Fed wanted to raise interest rates with the main reason being maybe to beat inflation. Mobius seems to think that to date, the Fed does not have a good enough reason to increase rates especially since inflation is dropping.
That said, it now leads to another interesting question of why inflation is so low in the U.S.
Mobius has his view on this and he simply blames it on the Internet and communication. To back up his claims, the fund manager used a variety of examples including the Uber app which has changed the face of the taxi industry as well as transportation worldwide. With advanced apps available, we have seen a distinct shift such as decreased prices. Other examples he provided included Amazon.
While it might seem ludicrous to think that mobile apps can play a role in the timing of the interest rate hikes by the Fed, Mobius may actually have a good point. Since car services and apps like Lyft and Uber have dominated the taxi space, the taxi medallion prices have plummeted in the U.S. In fact, according to the New York Times, average New York City taxi medallion prices declined to $872, 000 in October, falling 17% from a spring peak in 2013.
Added to this and negative for 3 straight quarters now is the U.K. price inflation which is driven in part by the decreasing prices at Internet retailers based in the country. Some high street stores are also feeling the squeeze from online retailers which has in turn weighed heavily on their prices.
With all of this happening globally, Mobius is sure that these changes and shifts in the markets are elements which central banks are not considering. Based on this, he is not sure that interest rates will rise and therefore, he is not overly concerned regarding the outlook for emerging markets, despite concerns that the dollar (USD) strength and possible interest rate hikes could cause havoc for investors.
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