Markets have been watching closely for signs the Fed is ready to start raising United States interest rates, a move that would lift the U.S. dollar and push down the kiwi. They include Fed payments of interest to banks on the reserves they keep on deposit with the central bank as a way to manage interest rates.
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Gaffney also noted that Yellen said policy remains data-dependent, and hinted that the Fed would consider the impact of higher rates on the dollar’s appreciation, which hurt exporters and manufacturers past year. The London-based Energy Aspects said in a note that storage units constructed for China’s strategic petroleum reserve are coming onstream through September and October, which is driving the higher demand.
In her speech Friday, Ms. Yellen called on actors outside the monetary policy realm to do more to boost economic growth in the longer run.
“Of course, our decisions always depend on the degree to which incoming data continues to confirm the Committee’s outlook”, she added.
The Fed raised interest rates last December for the first time in almost a decade. To ease the impact of the recession, for example, she said the Fed had effectively used bond purchases to reduce long-term borrowing rates and had assured investors that short-term rates would stay low.
Oil dipped into losses and is now climbing, moving inversely with the dollar since Chairwoman Janet Yellen’s remarks at the annual central bankers’ summit at Jackson Hole, Wyo.
Since 2008 the Fed kept rates close to zero, but pushed them up by 0.25 percent in December 2015.
And in a speech Sunday, Fischer said the Fed was getting “close to our targets”, including being “within hailing distance” of the Fed’s 2 percent goal for inflation.
Investors now thinks there’s a one in five chance that the Fed will raise rates at its next policy meeting, in September, and it’s even money that they will do so at the next one, in December.
But others say December remains in their view the more likely time for a resumption of rate increases. “While we don’t expect any shockers out of [Yellen’s] statement, we do anticipate some strong hints that the USA economy is strong enough to absorb a rate hike by year’s end”.
“Investors are not pricing in a Fed tightening”, said Swonk, who expects the Fed to take no action until January.
The conference’s theme is “Designing Resilient Monetary Policy Frameworks for the Future”, reflecting concern that the global economy has become trapped in a slump of low growth and low inflation and uncertainty about how central banks should respond. Investors were searching for new signals over whether an increase is on the table at the Fed’s September meeting after other Fed officials including New York Fed President William Dudley said it was a possibility.
The Fed began lowering the rate from 4.5% in 2006 as the economy slid toward the Great Recession.
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“They all agreed the Fed needs to do a better job on diversity”, said Ady Barkan, campaign director for the Fed Up coalition.
