The probability that the Fed will increase its benchmark at its Dec. 15-16 meeting is priced at 74 percent, according to data compiled by Bloomberg. Fed Chairman Janet Yellen is scheduled to testify to a congressional Joint Economic Committee on Dec. 3, and employment data due the next day are expecting to infirm or confirm an increase according to most analysts.

Still, I have difficulty to believe that the Fed committee is going to decide that the economy is finally healthy enough that borrowing costs should return to more “normal” levels based on a volatile data as the payrolls.

The last time that the Fed raised interest rates, it was in June 2006. Since the end of 2008, the Fed has kept its benchmark interest rate at a range between zero and one-quarter percent. They have used other techniques to prop up the economy, notably buying mortgage securities and other bonds to help bring down long-term rates further. The strategy, known as quantitative easing, encouraged more borrowing and lending, led to a stock market boom and, the Fed contends, eventually helped bring about a sustained economic expansion. One of the results has been to expand the size of its balance sheet to $4.5 trillion.

Indeed, since unemployment rate collapsed to 5% and equity market reached a new record.  Still, certain aspects of the recovery are bringing some doubts about this strategy and about the fact that the patient is well enough to be gradually taken off the medication, or that some economists: call a drug. 

As mentioned in a previous article, my doubts on an increase in December are grounded on three factors:

  1. A fragile domestic growth, – a growth slowing to 1.5% in the third quarter from 3.5% in the second quarter, a manufacturing sector under pressure, a lot of spare capacity or a participation rate at a very low level -, combined with an absence of inflation domestic and international;
  2. An international situation not favorable to an increase of interest rate – global deflationary situation and pressure in emergent markets;
  3. The background of Janet Yellen and her academic work on the employment market.

Opposite arguments completely justified could support a contrarian point of view. At the end of the day, an increase of interest rate in December or later in 2016 is not going to change the world for long-term investors.The message following the increase is going to be more important than the  timing. The level of economic uncertainties, a monetary policy which brings the world into an unknown territory and a complicated geopolitical situation are not helping for clarity.

Unfortunately, whatever the Fed committee will decide the 16 December, investors are going to have few answers to highlight their investment strategies. The 16 December is not the end of the suspense but the beginning of an area of new uncertainties.