Initially, Thursday’s almost-5 percent rise in oil prices and support from San Francisco Federal Reserve chief John Williams for a rate rise this year pushed yields higher.
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One other somewhat inconvenient truth for central bankers is that after well over half a decade of emergency monetary policy, there is some growth, but scant inflation to speak of in most developed economies other than rampant asset price inflation.
Its peers from Europe to Asia are easing policy.
The Reserve Bank of New Zealand, facing weak inflation apart from housing markets, like Australia, threw in the towel and trimmed its interest rate in an attempt to weaken its currency and ended up boosting it instead. Economists expect a 0.4 percent month-over-month increase in retail sales and sales, excluding autos, are expected to have increased by 0.2 percent. Macroeconomic Advisers shaved its tracking estimate to 2.9 percent from 3 percent, while Barclays economists lowered theirs to 1.8 percent from 2 percent.
A rate hike would not be braking the economy, Williams said, in an interview with the Washington Post.
After a weaker-than-expected 1.2 percent annualized pace of expansion in the second quarter, the USA economy is expected to grow 2.5 percent this quarter and slightly more than 2 percent in each quarter until the end of 2017, the poll found.
The lack of progress toward the goal has led Chicago Fed President Charles Evans to argue that the central bank might want to consider not raising rates again until inflation is clearly back above 2 percent.
Cantor Fitzgerald analyst Justin Lederer said he expected one interest-rate move, in December.
The idea is to get people to take risks that they werent taking before, said Stephen G. Cecchetti, professor of worldwide economics at the Brandeis global Business School.
“Our guess is that the market-implied odds of a 2016 rate hike will trend up over the remainder of the month, with both the FOMC minutes on August 17 and Chair (Janet) Yellen’s Jackson Hole speech on August 26 likely to suggest that September is very much a live meeting”, wrote Lou Crandall, Fed watcher at Wrightson ICAP, in a recent client note. Economists had forecast the PPI edging up 0.1 percent last month and gaining 0.2 percent from a year ago.
Investors see around a 45 percent chance for a further hike this December, according to CME’s FedWatch Tool, a move which would push up bond yields globally.
A majority of economists said the probability of a September hike had risen after a report last week showed 255,000 new jobs were created in July and wage growth picked up pace, although that was still not their central view.
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A few banks said there would be no increase at all this year.
