Federal Reserve Should Raise Rates as Fears of Global Recession Grow

The Federal Reserve needs to start raising interest rates, as the central bank is out of tools should the global economy enter a recession over the next year. ‘If we enter another global recession in the next 12-18 months and interest rates are at record lows and we have all of this quantitative easing in the markets, the central bank doesn’t really have anything left in its arsenal,’ said Craig Erlam, a senior market analyst with Oanda, based in London. Another global recession isn’t so far-fetched. Citigroup (C) analysts issued a note saying the chances of a global recession now stand at 55 percent on the heels of the weakness seen in emerging markets, most notably China. Citigroup chief economist Willem Buiter echoes the feeling that central banks are out of tools to assuage the pain of a looming recession. But worries that China won’t meet its 7 percent targeted growth rate, which has caused unprecedented volatility across the markets in recent weeks, leaves investors to believe the Fed will delay its rate hike, which many economists expected to come next week, during its September meeting. TheStreet’s Scott Gamm reports from New York.