There is a possibility of an interest rate hike next month, according to two senior officials of the Federal Reserve.
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The US central bank has held benchmark overnight rates in a zero to 0.25 percent range since December 2008 to combat a deep recession brought on by the financial crisis and nurse the economy back to health.
Medium term, until the next policy meeting by the Fed in December, there will be investors positioning themselves for a rate rise.
The Dow Jones industrial average rose 15.5 points, or 0.09 percent, to 17,745.98, the S&P 500 gained 1.87 points, or 0.09 percent, to 2,080.45 while the Nasdaq Composite dropped 15.39 points, or 0.3 percent, to 5,079.91. Something will have to give, and if the Fed starts to feel that stock markets are at risk of collapse, we could well see a stumble in the decision.
Rosengren cited a better-than-expected October USA employment report and measures of retail spending that signal domestic demand is overcoming weakness overseas that hurts US exporters. He forecasts the USA rates to be at 1.50% by end 2016, basing this on continued forward momentum in spending and the CPI.
Asian stocks were mixed, with Japanese and Chinese shares up, while the dollar stood at a 7-month high against its peers on Monday after robust U.S.jobs data bolstered expectations of an imminent Federal Reserve interest rate hike. At September’s sales pace it would take 1.31 months to clear shelves, unchanged from August, a still-high level that suggests businesses have little incentive to aggressively restock warehouses. But he called that “a blip” and said recent economic data “have been pretty positive”.
In particular, he pointed to Friday’s report from the Labor Department showing that employers added 271,000 jobs as “very good news”.
Starting to raise rates sooner rather than later will allow the Fed to push them up gradually and avoid the eventual risk of a run-up in inflation, Williams said.
Those surveyed saw little impact on the economy from the anticipated tightening in monetary policy. Although the numbers are unlikely to be as strong as the October figures, they probably will reinforce perceptions that the USA economy continues to heal.
Brent crude last traded at $47.32 a barrel, having slipped more than 7 percent from last week’s high.
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“The third-quarter inventory correction now looks less severe than we had previously believed”, said Daniel Silver, an economist at JPMorgan in NY. In the U.S. today, traders will be looking for further confirmation that the Fed is eyeing a potential rate hike in speeches by Fed chair Janet Yellen, vice chair Stanley Fisher, NY Fed president Bill Dudley, St Louis Fed president James Bullard, Richmond Fed president Jeffrey Lacker, and Chicago Fed president Charles Evans.
