Dudley said he expected the U.S. economy to grow around 2% annualised over the next 18 months, boosted by improved consumption.
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The next FOMC meeting is scheduled for September 20-21.
Clearly, Yellen and her colleagues have a hard task at hand when they meet again in a few weeks’ time for benchmark Fed funds rate-setting, which will have implications on the global economy.
“After all, “diminished” translates into still-present with strength in some sectors merely offsetting weakness in others”, she says. Stocks would be expected to decline in the face of a potential rate hike because it would make saving money more attractive.
“Investors have been shifting money to Asia, which is likely to be least affected by Brexit and as the US Fed appears to be in no hurry to raise interest rates”, said Yukino Yamada, senior strategist at Daiwa Securities. That is down from a 49 percent probability on July 26.
Gold is highly sensitive to rising USA interest rates, as the opportunity cost of holding the non-yielding asset increases, while boosting the dollar, in which it is priced.
The 10-year US Treasuries yield as a result fell to a three-week low of 1.450 per cent on Friday and last stood at 1.480 per cent.
Fed policymakers decided they wanted to see more data to determine if the one-month plummet in job growth was an anomaly or a signal of a slowdown in the labor market.
According to Samuel Sekuritas economist Rangga Cipta, the markets have had enough with the Fed’s uncertain plan for a benchmark interest rate hike, and have chosen to be pay more heed to China’s economic data.
The economy has been growing at below 2 percent year on year for the past three quarters, reflecting the decline in corporate profits that started in mid-2015.
For seven years beginning in late 2008, the Fed held the rate at an unprecedented level of near zero. At the time, officials projected a full percentage point of rate increases this year, an estimate that now looks almost impossible.
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This statement somewhat contradicts the Fed’s data-dependent approach to policy, and would inevitably mean a recession this year. “The U.S. dollar advance was stopped in its tracks by the disappointingly weak Q2 GDP figures”, Marc Chandler, global head of currency strategy at Brown Brothers Harriman, said in a note. “I believe the economy is basically at maximum employment, ” Cleveland Federal Reserve Bank President Loretta Mester said in a July 13 speech in Sydney, Australia.
