Hurricanes Irma and Harvey and the possibility of a debt ceiling face-off later this year are reducing the chances of a rate hike by the Federal Reserve in December, according to Dan Ivascyn, group chief investment officer at Pacific Investment Management Co.
"We do think it's going to have an impact on growth, on GDP," Ivascyn, whose firm oversees more than $1.6 trillion, said in a telephone interview from his office in Newport Beach, California. "We think it will initially lead to lower likelihood of the Fed moving in December."
The implied probability of a rate hike in December is about 29%, according to data compiled by Bloomberg. The Fed has raised its benchmark rate twice this year and was expected to increase one or two more times, based on projections of members of the Federal Open Market Committee.
President Donald Trump and Congress this week reached a deal to suspend the federal debt limit and fund the government into December, raising the stakes for a year-end budget battle.
Hurricane Irma weakened slightly to a Category 4 storm and remained on a collision course with southern Florida after devastating a chain of Caribbean islands. Two other hurricanes, Jose and Katia, are also churning in the Atlantic basin.
"There's the risk this is just the beginning of a series of storms," Ivascyn said. "We're not even close to the peak of the season just yet."
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