“We just have to turn this aircraft carrier around, get out of this zombie-like economy which is being fed on an elixir of low interest rates and get to a process of normalization”.
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This translates to closer to 3 percent rather than 2.25 percent yield on 10-year U.S. Treasurys.
In the 2004-2006 cycle, the Fed, under Alan Greenspan and later Ben Bernanke, raised rates 17 times in quarter-point increments and at the time announced it expected to remove accommodation “at a pace that is likely to be measured”.
“If that continues to happen there s a strong case to be made in December to raise rates”.
Investors widely expect the central bank to raise rates in December, but remain uncertain about the magnitude of the increase and the pace of further hikes.
“I wouldn’t be surprised to see prices fall below $1,000 as expectations of a rate hike affect sentiment”, Natixis analyst Bernard Dahdah said.
In recent weeks, a number of Fed speakers have said that a rate hike in December was on the table.
NEW YORK, Nov 23 The dollar rose to an eight-month high on Monday amid heightened expectations that the U.S. Federal Reserve might raise interest rates next month, driving down the prices of copper, gold and other metals.
The Board routinely reviews such requests and subsequently releases minutes of their discussions after Federal Open Market Committee meetings.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was all but flat, while South Korea’s main index .KS11 gained 0.2 percent.
Mr. Williams and Thomas Laubach, director of the Fed’s monetary affairs division, recently argued in a research paper that the natural interest rate, the real short-term interest rate consistent with the economy’s full potential, “fell sharply and shows no sign of recovering” since the financial crisis.
But inflation won’t reach the Bank’s target until 2017, according to a Reuters poll earlier this month, and therefore any rate rises will be gradual.
“We had a very large rally last week, and it’s not surprising to see the market correct after that”, said Stephen Massocca, Chief Investment Officer of Wedbush Equity Management LLC in San Francisco.
As can be expected, when inflation rises, gold similarly increases, forcing the Fed to act and tighten policy.
The European Central Bank may boost its stimulus programs as soon as next month as inflation wanes and economic prospects worsen.
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That fact appears to have been settled with the release of the October FOMC meeting minutes and a consistent series of comments and the accompanying theme from Fed speakers for the past month that the time is right for the first rate hike in the U.S. in nine years.
