The Federal Reserve likely won't raise interest rates at its next meeting on Sept. 20 because of a sluggish economic recovery, but a rate rise is still probably in the cards later this year, said Liz Ann Sonders, chief investment strategist at Charles Schwab.
“I don't think it's been swept off the table; you could argue it's not on the center of the table, possibly on the comer of the table,” said Ms. Sonders, the keynote speaker Wednesday at the Morningstar ETF conference in Chicago. “We do think the Fed would like to raise rates between now and years end.”
Ms. Sonders cited the release of a federal jobs report last week that showed modest job growth but the unemployment rate remaining unchanged at 4.9% as a reason the Fed may hold off on a rate increase until later this year.
Some economists worry that a rate rise could hurt the economic recovery while others, including Ms. Sonders, feel the lack of a rate rise could trigger inflation.
Ms. Sonders believes the lack of a rate increase has been bad for the economy.
“If anything, this has been a depressive on growth,” she said. “It would be a positive if the Fed stopped treating the patient like it was in the trauma room.”
The Fed instituted its first rate hike in about a decade in December 2015, increasing rates from near zero to a range of 0.25% to 0.5%. After the increase, Fed Chairwoman Janet Yellen said subsequent rate increases would be “gradual.”
On Thursday, the European Central Bank left interest rates and the terms of its asset purchase program unchanged.
In a separate interview with reporters, Ms. Sonders said the upcoming presidential elections could spark stock market volatility. She said that both Hillary Clinton and Donald Trump were the two most unpopular candidates running against each other in the history of presidential elections.
“I think there is a level of disgust, whether or not it sees itself into market performance is hard to say,” she said.
The lack of an incumbent running helps spur volatility because it raises questions as to what a new president's economic policies will be, Ms. Sonders said. So does a close race, she said. Noting that Mr. Trump in the polls has narrowed the gap between him and Ms. Clinton recently, Ms. Sonders said elections that are close can increase market volatility because of the “element of uncertainty."