After the excitement of Super Thursday – where the Bank of England signalled that interest rates are likely to remain on hold at their record low of 0.5% until well into next year – the attention shifts to the United States today.
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At this point, I see the USA economy as performing well, Yellen testified.
Appropriate action At its October meeting, the Federal Open Market Committee indicated it “could be appropriate to adjust rates in our next meeting”, she told the house financial services committee.
Bullion posted the biggest weekly drop in a year after payrolls surged and wage growth accelerated in October, boosting the case for the Federal Reserve to raise interest rates.
“The dollar is being bought gradually, with markets pricing in the rate increase as data come out and yields rise”. Of course, a few analysts believe that Yellen’s Fed has already waited too long, and missed their best window for raising interest rates. Fed Chair Janet Yellen and New York Fed President William Dudley said this week that the USA was ready for higher interest rates if upcoming economic data justified them. “Markets and the public should be thinking about the entire path of policy rates over time… that will be a very gradual path”.
In September, the Fed noted that the global slowdown might “restrain” USA economic growth. Increasing borrowing costs next month is a “live possibility”, Federal Reserve Chairwoman Janet Yellen said in testimony on Wednesday.
“It really is all about the Fed at the moment”, said David Govett, head of precious metals at London brokerage Marex Spectron. “We’re at 50-50 for the December meeting in terms of what’s being priced”.
Despite smaller job gains in previous months, Yellen says the slack in the labor market has “diminished significantly” in 2015. The calculations are based on the assumption the effective fed funds rate will average 0.375% after liftoff, compared with the current range of zero to 0.25%.
Tokyo and Shanghai stocks were higher in the morning but other markets traded in the negative territory.
Asian stocks are broadly lower on US rate hike worries.
“(That firmed) expectations for a strong payrolls report on Friday”, they said.
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Motorola shed 8.6% as the radio systems maker blamed weak sales in Latin America and a strong dollar for results that badly missed expectations.
