HSBC Predicts Fed Rate Hike and Stronger Dollar in December

HSBC is predicting that the US Federal Reserve will raise interest rates by another quarter point in December, bringing the benchmark rate to 4%. This decision would be a response to stubborn US core inflation, which is expected to remain above the 2% target until 2028.

The strengthening dollar and the yen's range-bound trading are also expected. The yen will likely fluctuate around its current levels due to the wide interest rate differential between the US and Japan.

HSBC's Chief Investment Officer for North Asia, Patrick Ho, believes that even with a potential quarter-point hike in December, the actual impact on overall US equity valuations would be limited. He notes that the US equity market currently trades at around 18-19 times earnings, within historically reasonable ranges.