Eight years on & the US still stuck in a new normal: Rabobank

Following the poor US non-farm payrolls data, there is only a minute chance of Fed hiking the rate in June, said Michael Every of Rabobank. It has been eight years since the financial crisis happened and the US economy is still stuck in a new normal, he added.Speaking to CNBC-TV18, Every said July is when the Federal Open Market Committee (FOMC) may introduce a change in the monetary policy, given the markets see good data in the interim. Meanwhile, Every believes Brexit will have very little impact on the markets going forward.Below is the verbatim transcript of Michael Every\\'s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Sonia: Do you think that a rate hike is ruled out by the Fed in the June 14 meeting because of the comments that Janet Yellen made?A: Almost certainly and the market seems to agree. Right now the Fed fund\\'s futures contract is suggesting only a 2 percent chance of a hike in June. Certainly, they won\\'t have seen enough incoming data by then to certainly saying that things are consistent with the optimistic picture that they are painting. So that means that the next likely opportunity is July but even then we would need to seen some good data and if we still got a glass half full, glass half empty data picture that pushes out to September.Latha: The markets have read Yellen\\'s statement very positively. Would you concur that basically she is not terribly worried about the economy but she is going to get the rate hikes in gradually. Is there reason enough for the market now to not worry about the Federal Open Market Committee (FOMC) even when the meeting happens on 14th and 15th?A: No, I surely concur with what you just said. As ever when I am speaking to you, I am perplexed in terms of how the market has reacted to that because up until recently what we have seen is that the consistent mean that when the Fed suggested that they cannot normalise rate quite quickly that has taken as a negative by the market because that implies that eight years after the financial crisis, we are still stuck in a new normal. However, in this case what we are seeing is the Fed says not now but later and the market says cheers.Latha: How much should the market be worried about Brexit? Is it something which will be more a UK problem or will a leave vote seriously create huge volatilities in the global markets? As an emerging market investor should be worried about this event?A: Nobody knows apart from the sterling exchange rate, at the moment we haven’t seen too much pricing in of the risk of Brexit into any financial assets. So only on the morning after we wake up and find out the results will we see whether there is a spill over into the general risk-off move which effects emerging markets or not. It is for the moment an unknown unknown.Sonia: What are your thoughts on the Indian markets because we have been using every possible bad news to buy into the market and this market has now seen a healthy trend over the last four-five months? Do you think that would continue?A: I am not saying it is not true but you have to wonder what is driving someone to think along those lines.Sonia: Your own thoughts on how to approach the Indian markets now?A: I don’t understand where the buoyancy is coming from against the global backdrop where either we are going to see higher US rates which is negative or we are going to see the Fed not raise rates and kick the can down the road because the US economy isn’t strong, which is negative. So whether buoyancy comes from, I do not know.