When will hike happen? Fed just complicated economists' job

I think there is more uncertainty now about exactly what the timing of this process is because the community was barely divided anyway about now partly because the Federal Reserve wasn't sending any signals. The problem is people cannot figure what would be much clear about China four weeks from now when the next meeting happens and the problem with December, the next meeting after that is that it's the time of the year which is pretty illiquid and difficult time to start a process like this. Therefore, there is a little more uncertainty now about exactly the timing because the problem is we understand the US economy is doing well and Janet Yellen said that, "we believe that there is still more unemployment that is yet to be recovered and we understand that inflation is very low. The only logic for starting the process now was the sooner you can start it the more gradual you can make it."

So what is happening now is people are not quite certain what will change the Fed's mind about the situation in Asia for example which seems to be bothering them.

The equity market which declined sharply in August has recovered halfway, so it is little unclear and when you look at the Fed forecast about the rate, they are still forecasting rate increases before the end of the year, so this is getting to be a little more complicated to figure out when do they think this perhaps and if that happens in October, what is so compelling in October that isn't visible now.

Nigel: You were in the camp that expected a rate hike to come in September itself and also you have been telling us that may be the sell-off in the emerging markets is over exaggerated. So, do you think we can see a big pullback coming in from the emerging markets or as you said they have already pullback a goodish bit from the lows we saw in August. So what are you factoring in one rate hike coming this year and are you expecting emerging markets to react positively?

A: I think what I would count on is, not only from the Fed but from any central bank actually; when inflation is very low, they are going to be extremely cautious. So, they probably are on the side of caution and the process of just interest rates going forward would be very gradual. So, I don't think the process of normalising interest rates in the US is going to be a huge challenge for the emerging markets.

So, I think if the news in China begins to fade, the negative views fade and we certainly see some stability. My guess is will provide more support to emerging markets community than whatever the Fed is going to do or not to do. I don't think the Fed and what they plan at doing, if they do it, is really going to be that disruptive because it will be very gradual I think.For entire interview, watch accompanying video.