Fed Running Out of Excuses to Avoid Rate Hike, TIAA’s Nick Says

  • ISM data point to U.S. economy picking up steam, Nick says
  • He advises long-term India bets, sees opportunity in Europe

How the U.S. Election Is Weighing on Financial Markets

Federal Reserve policy makers may find it harder to avoid raising interest rates, after lifting them only once in the past 10 years, said Brian Nick, a strategist at $889 billion asset manager TIAA.

“It looks like, if anything, the economy is picking up steam,” Nick said Thursday in a Bloomberg Television interview. “That should give the Fed a little bit more faith -- we’ll have to see where the jobs number comes in tomorrow -- that it can go ahead and begin raising rates.”

American service companies expanded in September at the fastest rate in almost a year, according to data this week from the Institute for Supply Management’s non-manufacturing index. Any person who was discouraged by figures from a month earlier “has to be very happy about how the numbers have come in,” Nick said. Payroll growth in the U.S. probably picked up in September as employers added about more than 170,000 workers, signaling steady labor-market improvement, based on economists’ projections ahead of a government report Friday.

The Federal Open Market Committee has opted at all six meetings this year not to raise rates. The FOMC, which meets next on Nov. 1-2, raised its target for the federal funds rate to a range of 0.25 percent to 0.5 percent in December, after keeping the benchmark near zero for seven years. Federal Reserve Bank of Richmond President Jeffrey Lacker, who dissented twice last year in favor of raising interest rates, this week urged the committee to hike rates to head off a likely pickup in inflation.

“It’s running out of excuses not to at this point,” Nick said.

‘Not Without Risk’

TIAA, the provider of insurance and retirement products to teachers, hired Nick this year as part of a push into money management. He joined from UBS Group AG to help lead strategy at TIAA Investments.

Nick said investors may find opportunity betting on European banks that plunged in value, though he declined to specify individual lenders and said the strategy is “not without risk.” He also highlighted India as an attractive market, especially for long-term investors.

“India seems to be a country that is increasingly well-run,” Nick said. “They’ve taken steps to making some economic reforms. The currency is relatively weak right now, so if you’re a dollar investor, you can feel good about where you’re getting in.

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