Despite continued weakness in economic data, the Fed seems to be getting more hawkish on interest rates and it may not be the inflation problem that is causing it.

It seems that out of no where over the past few weeks, the Fed has gone from a “no more cutting” scenario to a raising rate stance.  Sure, one significant reason is the continued surge in inflation, but there may be a bigger reason out there and it doesn’t really relate to the strength of the US economy.

Over the past few weeks many nations around the globe have adopted a tightening bias, if they didn’t already raise rates.  Some economic zones that raised rates include India and Australia to mention a few.  The EURO Zone has adopted a tightening bias and other zones have followed suit.  The interesting story behind these scenarios is that their domestic economies warrant an increase in rates and can probably sustain them. 

The US on the other hand, is trying to adopt a higher rate scenario despite things like a weak Equity market, pathetic real estate market and increased unemployment…why?  Because if the US stays in an easing mode while the rest of the globe tightens….it could simply be “Lights Out” for the US currency.

So in case you were sucked into the idea that the US was rebounding and needed a rate hike…think again.  It’s more of a US$ survival mode tactic.